- published: 17 Jan 2014
- views: 50757
Duration may refer to:
In finance, the duration of a financial asset that consists of fixed cash flows, for example a bond, is the weighted average of the times until those fixed cash flows are received. When an asset is considered as a function of yield, duration also measures the price sensitivity to yield, the rate of change of price with respect to yield or the percentage change in price for a parallel shift in yields.
The dual use of the word "duration", as both the weighted average time until repayment and as the percentage change in price, often causes confusion. Strictly speaking, Macaulay duration is the name given to the weighted average time until cash flows are received, and is measured in years. Modified duration is the name given to the price sensitivity and is the percentage change in price for a unit change in yield.
Both measures are termed "duration" and have the same (or close to the same) numerical value, but it is important to keep in mind the conceptual distinctions between them. Macaulay duration is a time measure with units in years, and really makes sense only for an instrument with fixed cash flows. For a standard bond the Macaulay duration will be between 0 and the maturity of the bond. It is equal to the maturity if and only if the bond is a zero-coupon bond.
Duration tells investors the length of time, in years, that it will take a bond's cash flows to repay the investor the price he or she paid for the bond. A bond's duration also tells investors how much a bond's price might change when interest rates change i.e. how much risk they face from interest rate changes.
This video discusses the concept of Macaulay Duration. The video uses a comprehensive example to demonstrate how Macaulay Duration is calculated, and it explains how Macaulay Duration is used to compare the interest rate risk of different bonds. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.EducationUnlocked.org/ To like us on Facebook, visit https://www.facebook.com/Edspira Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Facebook, visit https://facebook.com/Prof.Mich...
Bond investors worry about how far and fast interest rates might rise and what impact this could have on the price and yield of the bonds that they hold. In this short video Tim introduces duration, a term that can help to reveal the answer.
An introduction to Duration and examples of calculating duration. The Template for this video can be downloaded at http://www.tinyurl.com/brackerduration
Using a simple zero-coupon bond, I illustrate bond duration. We have a few variations, including weighted average time to cash flow, but the best way to view duration is as a SENSITIVITY: the % change in bond price given a % change in yield (YTM). For more financial risk videos, visit our website! http://www.bionicturtle.com
This video illustrates how duration can be used to approximate the change in bond price given a change in interest rates. It also introduces and discusses convexity. Next there is a discussion of using duration as part of an immunization strategy to where price risk and reinvestment rate risk offset each other. Finally, calculating duration for portfolios is discussed. The template can be found at http://tinyurl.com/BrackerDuration2
Like this video? Full Video Lessons for $199 and Adapt Question Bank starting at $41 https://www.AdaptPrep.com/ Adapt Prep provides customizable CFA exam prep. Our mission is to put your CFA exams in the past tense, bringing you one step closer to fulfilling your professional aspirations. Instructor: Mike Carmody, CFA, FSA, MAAA Check out our Site: http://www.AdaptPrep.com/ Read our Blog: http://blog.AdaptPrep.com/ Follow us on Twitter: http://twitter.com/AdaptPrep Like us on Facebook: http://www.facebook.com/AdaptPrep
Bond Duration Business Career College is a national financial services education provider. See our insurance, financial planning and continuing education courses, including self-paced and instructor led options, at https://www.businesscareercollege.com For great industry articles, follow on Twitter (https://twitter.com/JasonWattBCC) or like on Facebook (https://www.facebook.com/BusinessCareerCollege/).
Duration tells investors the length of time, in years, that it will take a bond's cash flows to repay the investor the price he or she paid for the bond. A bond's duration also tells investors how much a bond's price might change when interest rates change i.e. how much risk they face from interest rate changes.
This video discusses the concept of Macaulay Duration. The video uses a comprehensive example to demonstrate how Macaulay Duration is calculated, and it explains how Macaulay Duration is used to compare the interest rate risk of different bonds. Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.EducationUnlocked.org/ To like us on Facebook, visit https://www.facebook.com/Edspira Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. The goal of Michael's life is to increase access to education so all people can achieve their dreams. To learn more about Michael's story, visit http://www.MichaelMcLaughlin.com To follow Michael on Facebook, visit https://facebook.com/Prof.Mich...
Bond investors worry about how far and fast interest rates might rise and what impact this could have on the price and yield of the bonds that they hold. In this short video Tim introduces duration, a term that can help to reveal the answer.
An introduction to Duration and examples of calculating duration. The Template for this video can be downloaded at http://www.tinyurl.com/brackerduration
Using a simple zero-coupon bond, I illustrate bond duration. We have a few variations, including weighted average time to cash flow, but the best way to view duration is as a SENSITIVITY: the % change in bond price given a % change in yield (YTM). For more financial risk videos, visit our website! http://www.bionicturtle.com
This video illustrates how duration can be used to approximate the change in bond price given a change in interest rates. It also introduces and discusses convexity. Next there is a discussion of using duration as part of an immunization strategy to where price risk and reinvestment rate risk offset each other. Finally, calculating duration for portfolios is discussed. The template can be found at http://tinyurl.com/BrackerDuration2
Like this video? Full Video Lessons for $199 and Adapt Question Bank starting at $41 https://www.AdaptPrep.com/ Adapt Prep provides customizable CFA exam prep. Our mission is to put your CFA exams in the past tense, bringing you one step closer to fulfilling your professional aspirations. Instructor: Mike Carmody, CFA, FSA, MAAA Check out our Site: http://www.AdaptPrep.com/ Read our Blog: http://blog.AdaptPrep.com/ Follow us on Twitter: http://twitter.com/AdaptPrep Like us on Facebook: http://www.facebook.com/AdaptPrep
Bond Duration Business Career College is a national financial services education provider. See our insurance, financial planning and continuing education courses, including self-paced and instructor led options, at https://www.businesscareercollege.com For great industry articles, follow on Twitter (https://twitter.com/JasonWattBCC) or like on Facebook (https://www.facebook.com/BusinessCareerCollege/).
An introduction to Duration and examples of calculating duration. The Template for this video can be downloaded at http://www.tinyurl.com/brackerduration
This video illustrates how duration can be used to approximate the change in bond price given a change in interest rates. It also introduces and discusses convexity. Next there is a discussion of using duration as part of an immunization strategy to where price risk and reinvestment rate risk offset each other. Finally, calculating duration for portfolios is discussed. The template can be found at http://tinyurl.com/BrackerDuration2
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