Duration
Also called: modified duration, bond duration
A measure of how sensitive a bond's price is to changes in yields. A duration of 7 means a loss of roughly 7% if yields rise by 1 percentage point.
Longer bonds, and bonds with lower coupons, have higher durations. The rule "price change ≈ −duration × yield change" is an approximation that works best for small changes. Debt fund factsheets usually report the fund's duration.
Learn more in these lessons
- Bonds and bond yieldsWhy do bond prices fall when yields rise, and what return does a bond really give?
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