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Definition of 'Empirical Duration'
The calculation of a bond's duration based on historical data. Empirical duration is estimated statistically using historical market-based bond prices and historical market-based Treasury yields. When the historical yields change, the historical bond prices will change accordingly, which forms that basis for empirical duration. Regression analysis is the statistical process used to estimate empirical duration.
Duration is the percentage change in a bond's price with a 100-basis-point change in yield.
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Investopedia explains 'Empirical Duration'
The calculation of empirical duration has some advantages and disadvantages over other duration calculations, such as effective duration or modified duration. The advantages of using empirical duration include that the estimate does not rely on theoretical formulas and analytic assumptions, and the only inputs needed are a reliable series of bond prices and a reliable series of Treasury yields.
Some disadvantages are that a reliable series of a bond's price may not be available, and the series of prices that is available might not be market based, but rather modeled or matrix priced (the price is based on a similar security).
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Search results for 'Empirical Duration'
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http://www.investopedia.com/university/advancedbond/advancedbond5.asp
... This makes empirical sense, because when a bond pays a higher coupon rate or has
a ... The diagram below summarizes how duration changes with coupon rate and yield ...
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http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/probability-subjective-empirical.asp
... Risk; 14.18 Event Risk; 14.19 Pricing Bonds; 14.20 Duration; 14.21 International
Bonds; 14.22 Government Bonds; 14.23 Mortgage-Backed ...
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http://www.investopedia.com/university/tradingsystems/tradingsytems2.asp
... Systems: Empirical Decision-Making Required - When determining trends, there is
always an empirical element to consider: the duration of the historic trend. ...
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http://financialedge.investopedia.com/financial-edge/0911/Top-4-Things-To-Know-About-The-Last-Double-Dip-Recession.aspx
... The 16-month duration of the contraction is about average for the 33 downturns ... There
is little empirical evidence to support this claim, although it is clear ...
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http://www.investopedia.com/exam-guide/cfa-level-1/securities-markets/institutionalization-capital-markets-effects.asp
... Risk; 14.18 Event Risk; 14.19 Pricing Bonds; 14.20 Duration; 14.21 International
Bonds; 14.22 Government Bonds; 14.23 Mortgage-Backed ...
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http://www.investopedia.com/exam-guide/cfa-level-1/global-economic-analysis/monetary-policy-exchange-balance-payments.asp
... Risk; 14.18 Event Risk; 14.19 Pricing Bonds; 14.20 Duration; 14.21 International
Bonds; 14.22 Government Bonds; 14.23 Mortgage-Backed ...
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