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Bond duration

Bond duration Definition

In economics and finance, bond duration is the weighted average maturity of a bond or series of cash flows received.

It is useful as a measure of the price sensitivity of a bond to interest rate movements. It is approximately inversely proportional to the percentage change in price for a given change in yield. For example, for small interest rate changes, the duration is the approximate percentage that the value of the bond will lose for a 1% increase in interest rates. So a 15 year bond with a duration of 7 years would fall approximately 7% in value if the interest rate increased by 1%.

RELATED CATEGORIES
Bonds
Economy




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