Series 79: Duration

Duration

Duration is the measure of a bond’s sensitivity to relatively small interest rate changes, and therefore of the risk posed by interest rate volatility. A bond’s duration expresses the approximate percentage change in the price of a bond that would result from a 1% change in yield. Thus, the greater a bond’s duration, the greater its volatility in response to interest rate changes. For example, the price of a bond with a duration of 6 woul