# Duration

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## Duration

A common gauge of the price sensitivity of a fixed income asset or portfolio to a change in interest rates.

## Duration

The amount by which a bond's price increases or decreases as the result of a 1% change in interest rates. When interest rates rise above a bond's own interest rate, its price usually declines because an investor can earn a higher yield with another bond. Likewise, when interest rates fall, the bond's price usually rises. Duration measures how much the price changes and, for that reason, is a measure of a bond's volatility.

## duration

The number of years required to receive the present value of future payments, both interest and principal, from a bond. Duration is determined by calculating the present value of the principal and each coupon and then multiplying each result by the period of time before payment is to occur. The concept of duration is used to relate the sensitivity of bond price changes to changes in interest rates. Also called mean term.

## Duration.

In simplified terms, a bond's duration measures the effect that each 1% change in interest rates will have on the bond's market value.

Unlike the maturity date, which tells you when the issuer has promised to repay your principal, duration, which takes the bond's interest payments into account, helps you to evaluate how volatile the bond's price will be over time.

Basically, the longer the duration -- expressed in years -- the more volatile the price. So a 1% change in interest rates will have less effect on the price of a bond with a duration of 2 than it will on the price of a bond with a duration of 5.

References in periodicals archive ?
The test words and phoneme boundaries were manually tagged using the speech analysis software Praat (Boersma, Weenink 2014-2015), after which segment durations were extracted from the annotated TextGrid using a script.
This study was the first to evaluate associations of sleep duration at midlife and later life, and change in sleep duration over time, with memory in 15,263 participants of the Nurses' Health Study.
22) Nevertheless, they did not report clear differences between impulse durations of 100 and 200ms, which is consistent with the present results.
During this period, the Treasury engaged in many refundings and open market sinking fund purchases (5) that resulted in dramatic changes in the quantity and duration of aggregate Treasury bonds outstanding.
This change to a shorter sleep duration was associated with lower scores at follow-up on three of the six cognitive tests, with reasoning, vocabulary and global cognitive status all being affected adversely.