GLOSSARY · INVESTING

Duration (bonds)

A measure, in years, of how sensitive a bond or bond fund's price is to changes in interest rates. As a rule of thumb, the price moves by roughly the duration in percent for each one-point change in rates, in the opposite direction. Longer maturities and lower coupons mean higher duration.

Also called: duration, modified duration, interest-rate sensitivity
FORMULA
Price change (%) ~ -duration x change in yield (percentage points)
LEARN IT PROPERLY
CHAPTER · INVESTMENT FOUNDATIONS · FOUNDATIONSHow Bonds WorkCHAPTER · INVESTMENT FOUNDATIONS · FOUNDATIONSBuilding the Bond Side of a Portfolio
RELATED TERMS
Yield to maturityAsset allocation
SOURCES
All terms →The Library →