positive duration

positive duration
(1) The name for a particular relationship between changes in the price of a debt security and changes in prevailing interest rates. When a security has positive duration, its price increases in response to a decrease in prevailing market rates. Almost all securities have positive duration. Note that the term " duration" as used in this definition refers to modified duration.
(2) For a financial institution, a situation in which the total duration of its assets is longer than the total duration of its liabilities. In such cases, the duration of equity is positive. In other words, an entity with long-term assets funded by short-term liabilities will have a positive duration of equity. A financial institution that has a positive duration of equity may also be described as having a negative gap or as being liability sensitive. The theoretical equity value, but not necessarily the stock price, of a financial institution with a positive duration of equity will decrease if interest rates rise and increase if interest rates decline. Note that the term " duration" as used in this definition refers to modified duration.
See convexity, modified duration and negative duration. American Banker Glossary

Financial and business terms. 2012.

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