Duration Measures And Price Sensitivity

Duration Measures And Price Sensitivity groups related fixed income terms inside Duration, Convexity, and Rate Risk. Fixed-income terms for average life, duration, dollar duration, effective duration, key-rate duration, Macaulay duration, and modified duration.

Use this subsection when the question is about bond cash flows, fixed-income risk, stock ownership, dividend mechanics, or equity market labels rather than broad investing strategy.

In this section

• Average Life: Measure of Bond Duration
  A somewhat artificial measure used to compare bonds of different duration and repayment schedules. It is calculated as the average of the periods for which funds are available, weighted by the amounts available in each of these periods.
• Dollar Duration
  Dollar-based bond risk measure showing how much a position's value should change for a one-basis-point move in yield.
• Duration
  Interest-rate sensitivity measure showing how strongly a bond's price should react to yield changes.
• Effective Duration
  Bond sensitivity measure for callable or prepayable structures where expected cash flows can change as rates move.
• Key Rate Duration
  Yield-curve sensitivity measure showing how exposed a bond or portfolio is to one specific maturity point on the curve.
• Macaulay Duration: Measuring the Weighted Timing of Bond Cash Flows
  Learn what Macaulay duration measures, how the formula works, and why it is foundational for fixed-income interest-rate analysis.
• Modified Duration
  Bond price-sensitivity measure that estimates how much price should change for a small change in yield.