DEFINITION of 'Duration'
A measure of the sensitivity of the price (the value of principal) of a fixedincome investment to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices.
INVESTOPEDIA EXPLAINS 'Duration'
The duration number is a complicated calculation involving present value, yield, coupon, final maturity and call features. Fortunately for investors, this indicator is a standard data point provided in the presentation of comprehensive bond and bond mutual fund information. The bigger the duration number, the greater the interestrate risk or reward for bond prices.
It is a common misconception among nonprofessional investors that bonds and bond funds are risk free. They are not. Investors need to be aware of two main risks that can affect a bond's investment value: credit risk (default) and interest rate risk (rate fluctuations). The duration indicator addresses the latter issue.

Basis Point (BPS)
A unit that is equal to 1/100th of 1%, and is used to denote ... 
Effective Duration
A duration calculation for bonds with embedded options. Effective ... 
Macaulay Duration
The weighted average term to maturity of the cash flows from ... 
Modified Duration
A formula that expresses the measurable change in the value of ... 
ZeroCoupon Bond
A debt security that doesn't pay interest (a coupon) but is traded ... 
Key Rate Duration
Holding all other maturities constant, this measures the sensitivity ...

Do longterm bonds have a greater interest rate risk than shortterm bonds?
The answer to this question lies in the fixed income nature of bonds and debentures, often referred to together simply as ... Read Full Answer >>

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