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A common gauge of the price sensitivity of a fixed income asset or portfolio to a change in interest rates.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Figures released last week showed that the all-Wales eight minute target was missed for the tenth month in a row and hit a new low as every area of the country missed the time frame in March.
In her view, the Census will not be postponed and this was confirmed by government spokesperson Muhamed Hoxha who stated that this statistical operation will be held in the foreseen time frame, at the beginning of October.
"Developing VantageScore 2.0 over multiple performance windows reduces the model's sensitivity to highly volatile behavior in a single time frame," Davies explained.
'I'm not setting a time frame (for a fundraising) as we have to monitor the markets,' said Toma, former Mizuho Corporate Bank executive who took the Tokyo bank's top position in June.
The time frame: Unlike other dire threats to human existence, such as nuclear war or military-industrial dictatorships, climate change has a finite time frame.
A survey of industrial distributors shows weak markets, but also a possible stabilization in the industrial sector based upon an uptick during the January-February time frame, according to Longbow Research analyst Eli Lustgarten.
* People are motivated to act within their time frame, not yours.
This elicited information regarding routine laboratory activities, contact with CAP samples, tasks performed in conjunction with handling of the samples, and any influenzalike symptoms (sudden onset of fever, cough, headache, and muscle pain) within the respective time frame. Persons who had worked in a receiving laboratory from September 1, 2004, to April 15, 2005, and had performed routine procedures in virology (defined as transport of samples, preparation of samples for diagnostic testing, antigen testing, nucleic acid amplification testing, and virus isolation) were eligible for the study.
Their previous record for the job was 47 minutes, making Yankee Stadium the only sports arena in the country able to be completely restored to pregame status within this time frame. Harvard topped their previous best with a record time of 40 minutes for the between game clean-up.
A stated time frame of 90 days enables national office counsel to appropriately prioritize this type of advice." This type of guidance is similar in purpose to the Field Service Advice memorandum used in prior years.
Think of the 1951 National League Pennant race: was the time frame Bobby Thompson's home run (one inning), that last game, the last few weeks of the season, or one of the games the Dodgers lost in April?
What is the time frame in which you've run all these half-marathons?