What is 'Modified Duration'
Modified duration is a formula that expresses the measurable change in the value of a security in response to a change in interest rates. Calculated as:
Where:
n = number of coupon periods per year
YTM = the bond's yield to maturity
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BREAKING DOWN 'Modified Duration'
Modified duration follows the concept that interest rates and bond prices move in opposite directions. This formula is used to determine the effect that a 100basispoint (1%) change in interest rates will have on the price of a bond.
RELATED TERMS

Duration
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RELATED FAQS

For what financial instruments is a modified duration relevant?
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What is the average profit margin of a company in the chemicals sector?
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What is the risk return tradeoff for bonds?
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Which is a better metric, modified duration or Macaulay duration?
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What is the relationship between current yield and yield to maturity (YTM)?
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How can I use a bond's duration to predict its return?
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