Definition of Duration:
Duration measures how long it takes, in years, for an investor to be repaid the bond’s price by the bond’s total cash flows. At the same time, duration is a measure of sensitivity of a bond's or fixed income portfolio's price to changes in interest rates. In general, the higher the duration, the more a bond's price will drop as interest rates rise (and the greater the interest rate risk). As a general rule, for every 1% change in interest rates (increase or decrease), a bond’s price will change approximately 1% in the opposite direction, for every year of duration. If a bond has a duration of five years and interest rates increase 1%, the bond’s price will drop by approximately 5% (1% X 5 years). Likewise, if interest rates fall by 1%, the same bond’s price will increase by about 5% (1% X 5 years).
The time during which something continues.
Period required to complete an activity, job, or task, usually excluding holidays and other non-working days.
Period a fixed-income security (such as an interest bearing bond) will take to recover the investment (principal and interest) in present value terms. This information is usually provided by the securitys dealer or the mutual fund that invests in that security. See also Macaulay duration, and modified duration.
Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. A bond's duration is easily confused with its term or time to maturity because they are both measured in years. However, a bond's term is a linear measure of the years until repayment of principal is due; it does not change with the interest rate environment. Duration, on the other hand is non-linear and accelerates as time to maturity lessens.
Change in the price of an interest generating security (such as a bond) caused by a one-percent change in interest rates.
Synonyms of Duration
Abidingness, Age, Antiquity, Changelessness, Chronology, Constancy, Continuance, Continuation, Continuity, Defeat of time, Defiance of time, Diuturnity, Durability, Durableness, Duree, Endurance, Firmness, Fixedness, Frozenness, Hardening, Immobility, Immovability, Immovableness, Immutability, Invariability, Invariableness, Inveteracy, Lastingness, Long standing, Long-lastingness, Long-livedness, Longevity, Maintenance, Perdurability, Perennation, Period, Permanence, Permanency, Perpetualness, Perpetuity, Persistence, Persistency, Psychological time, Quiescence, Rigidity, Run, Solidity, Space, Space-time, Span, Spell, Stability, Standing, Stasis, Steadfastness, Survival, Survivance, Tense, Tenure, Term, The future, The past, The present, Tide, Time, Timebinding, Torpor, Unchangeability, Unchangingness, While, Full length, Length of time, Time, Time span, Time scale, Period, Term, Span, Spell, Stretch, Fullness, Length, Extent, Continuation, Continuance, Perpetuation, Prolongation
How to use Duration in a sentence?
- Duration, in general, measures a bond's or fixed income portfolio's price sensitivity to interest rate changes.
- A flight of over eight hours duration.
- I was in awe for the whole duration of the song because of how beautiful the lyrics were and how elegant the melody was.
- Modified duration measures the price change in a bond given a 1% change in interest rates.
- To find out the duration of the meeting, we took note of the time the meeting both began and ended, and calculated the total length of it.
- Macaulay duration estimates how many years it will take for an investor to be repaid the bond’s price by the its total cash flows, and should not be confused with its maturity.
- A fixed income portfolio's duration is computed as the weighted average of individual bond durations held in the portfolio.
- Sometimes a business may go in a slump but as long as you believe in your product you can just ride out the duration of the slump.
Meaning of Duration & Duration Definition