Duration measures the amount by which price varies with respect to changes in yield.
Duration is the approximate percentage change in the price of a bond or bond portfolio to a 100 basis point (1%) change in yields, per Frank Fabozzi.
Questions tagged [duration]
11 questions
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Why is the Macaulay Duration recalculated after each coupon payment?
I'm trying to understand why Macaulay Duration is recalculated after each coupon payment. I can see why I want to know the duration when purchasing a bond - to figure out how long till I recoup my initial investment. Yet the formula continuously…
John D
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What is the difference between fixed-income duration and equity duration?
I noticed this question, How to determine duration of a common stock whose dividends grow in perpetuity? I am familiar with the concept of duration for bonds, but not for common stock (actually, it is unfamiliar to me for equity-type securities of…
Ellie K
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What does "Principal" mean in this definition of Bond Duration?
According to Investopedia: "Duration measures a fixed income’s sensitivity to changes in interest rates. Duration is a complicated calculation, but it's standard information that's provided with bonds and bond mutual funds . It essentially reveals…
domino
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Choosing the duration of a loan, how the monthly payments evolve in function of the loan term?
I would like to visually discover how the monthly repayments of a given loan (for a given amount ; taking about a fixed rate loan) evolve in function of the total duration of the loan. I assume it is not a linear diminution, is it ?
Same question…
user1052753
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Bond Duration with respect to time
How would the duration of a coupon bond change with respect to time. Would you use the original price, and yield to determine the new duration, or would you have to calculate a new price for the new yield. For example suppose bought a 10 year 10%…
Skrrrrrtttt
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Simpler way of calculating duration for bonds?
So the question is: Find the duration of a 6% coupon bond making annual coupon payments if it has 3 years until maturity and has a yield to maturity of 6%. What is the duration if the yield to maturity is 10%?
I am able to do get the correct answer…
Nichrome
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Difference between Macaulay duration and modified duration?
I'm studying finance and am struggling to find the difference between the macaulay duration and the modified duration?
I believe the Macaulay duration is the effective time a bond is due to be repaid in years using a weighted average of future…
Jay
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How to determine duration of a common stock whose dividends grow in perpetuity?
What is the duration of a common stock whose dividends are expected to grow at a constant rate in perpetuity? Specifically, how can I compute this, since the dividends will grow forever?
Update: Ok, to make this more realistic, assume that the…
Razos
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Why do some mutual funds or indexes have an average effective maturity that is way larger (2-4 times larger) than the average effective duration?
I would like to know if this difference occurs when the coupon payments are very large and/or if there are other reasons.
JorgeT
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Calculating bond duration and price change when yield changes
I've been working on this forever and I'm still not sure if my answers are correct. My question is:
A 10 year bond with a face value of $1000 paying semi-annual 7% coupon. Bond is paying 7% YTM.
Calculate the duration of the bond - which I have done…
Roger
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Active Bond Funds - Interest Rate Swaps
I am a long time investor in an active Australian Bond fund (set & forget type of thing) but lately I have been doing a lot of research and I have realised that bond managers use a lot of derivatives to manage risk and I'd really love to get a…
NewInvestor
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