Average Life
Average life estimates the weighted average time until principal is repaid on amortizing, callable, or asset-backed securities.
Fixed-income terms for average life, duration, dollar duration, effective duration, key-rate duration, Macaulay duration, and modified duration.
Duration measures and price-sensitivity terms estimate how a bond or portfolio may respond to changes in interest rates.
Use this branch when a bond’s maturity is not enough to describe its rate exposure.
| Term | What it clarifies |
|---|---|
| Duration | General rate-sensitivity and weighted-timing concept. |
| Modified Duration | Approximate percentage price sensitivity to yield changes. |
| Macaulay Duration | Weighted average timing of cash flows. |
| Effective Duration | Duration estimate that can incorporate embedded options. |
| Dollar Duration | Dollar price sensitivity to yield changes. |
| Key-Rate Duration | Sensitivity to specific maturity points on the yield curve. |
| Average Life | Average timing of principal repayment. |
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Average life estimates the weighted average time until principal is repaid on amortizing, callable, or asset-backed securities.
Dollar-based bond risk measure showing how much a position's value should change for a one-basis-point move in yield.
Interest-rate sensitivity measure showing how strongly a bond's price should react to yield changes.
Effective duration estimates bond price sensitivity when embedded options or prepayments can change expected cash flows.
Yield-curve sensitivity measure showing how exposed a bond or portfolio is to one specific maturity point on the curve.
Macaulay duration measures the present-value-weighted average timing of a bond's cash flows.
Modified duration estimates the percentage price change of a fixed-income security for a small change in yield.