Bond duration is the amount of time it will take the bond to deliver half of the total payment back to the investor. The bond duration is weighted, or adjusted to factor in the time value of money. Since cash received soon can quickly be invested for returns, payments in the future are worth less than payments received soon or cash held today.
Bond Duration depends on the balance of yield and maturity. A higher yield will result in a shorter duration if comparing two bonds of the same maturity. The duration also indicates the sensitivity of bonds to the movements of interest weights. A longer duration results in higher interest rate risk exposure. Assuming equal risk from the issuer, a shorter duration is more likely to be received.
The duration itself is subject to change, since the next payment at any date can never be guaranteed and duration assumes full payment. Durations are generally shorter than their maturity. The exception is Zero-coupon bonds, which have durations equal to their maturity. These bonds pay both interest and principal at maturity, so they cannot have lesser durations.
Did we help you? Vote with a Crypto-Donation!
Donate Bitcoin Cash
International Economic Analysis:
- Major Currency Economic Summaries
- Performance of Major Imports and Exports
- Mandates of Central Banks versus Expectations
- Performance Indexes of Major Economies
- Economically Correlated Currency Projections
- Large Funds Currency Sentiment Readings
- List of Technical Indicators to Look For
- Occasional: Foregin Exchange Technicals Markups
American Markets Analysis:
- Summaries of American Economic Structure
- Performance of Major
- Federal Reserve Mandate versus Expectations
- Performance Indexes of U.S Economy
- Economically Correlated U.S Dollar Projections
- Large Trading Fund Index Sentiment Readings
- Market Wide Earnings Versus Valuations
- Fundamental Ranking of U.S Business Sectors
- Best and Worst Future Consensus Estimates
- Occasional: Firm Fundamental Strength Report
- List of Technicals to Look for While Trading
Investment and Finance, Serviced by Amazon
A Concise Guide to Macroeconomics, Second Edition: What Managers, Executives, and Students Need to Know
A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market
Algorithmic Trading: Winning Strategies and Their Rationale
Alternative Investments: CAIA Level I (Wiley Finance)
Alternative Investments: Instruments, Performance, Benchmarks, and Strategies