duration

duration
A sophisticated measure of the average timing of cash flows from an asset or a liability or from an asset portfolio or a liability portfolio. Essentially, duration is a more accurate measure of maturity because it reflects the timing of cash flows from periodic interest and/or principal payments in addition to the cash flows represented by the funds transferred at maturity. Duration is computed by summing the present values of all of the future cash flows after multiplying each by the time until receipt, and then dividing that product by the sum of the present value of the future cash flows without weighting them for the time of receipt. One way to view duration is as the balancing point for a series of cash flows. One author described it as that "sweet spot" or "balancing point" somewhere between the day a position is acquired and the day that it matures, where the return remains practically unchanged no matter what happens to interest rates.
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A common gauge of the price sensitivity of a fixed income asset or portfolio to a change in interest rates. Bloomberg Financial Dictionary
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A measure of a bond's volatility or sensitivity of the bond's price to changes in interest rates. (Defined as the weighted average of the number of years in the bond's life, the weighting factor being the present value of the cash flows in the year discounted at the internal rate of return of the bond's cash flows). Dresdner Kleinwort Wasserstein financial glossary
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A measurement of the change in the value of an instrument in response to a change in interest rates. It is the primary basis for comparing the effect of interest rate changes on prices of fixed-income instruments. Exchange Handbook Glossary
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(modified)
A measure of the relative volatility of a bond; i.e. the price change of a bond for a given change in the interest rate. Duration is measured in units of time. It includes the effects of time until maturity, cash flows and the yield to maturity. LIFFE

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duration du‧ra‧tion [djʊˈreɪʆn ǁ dʊ-] noun [singular, uncountable]
the length of time that something continues:

• We have hired her for the duration of the project.

• Economists predict that the recession will be limited in duration.

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   A measure of the average maturity of a bond's cash flows from both coupons and principal repayment, or how long you have to wait to earn exactly half the expected total return in coupons and principal repayment. A zero coupon bond's duration would be the same as the maturity date because there are no coupons to take into account. Duration, quoted in years, indicates the average exposure to market risk. It allows bonds with different coupons and maturities to be compared. Bonds with higher durations face higher risk from changes in interest rates. Also known as Macauley Duration.
   ► See also Coupon.

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duration UK US /djʊəˈreɪʃən/ noun [C or U]
the length of time that something lasts: a two-year/ten-month/six-week, etc. duration »

Most placements of agency IT staff are of a three-month or six-month duration.

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Does the rate only apply for a limited period or for the duration of the loan?


Financial and business terms. 2012.

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  • Duration — may refer to: The measure of continuance of any object or event within Time Duration (music) an amount of time or a particular time interval, often cited as one of the fundamental aspects of music Duration (philosophy) a theory of time and… …   Wikipedia

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  • Duration — Du*ra tion, n. [OF. duration. See {Dure}.] The state or quality of lasting; continuance in time; the portion of time during which anything exists. [1913 Webster] It was proposed that the duration of Parliament should be limited. Macaulay. [1913… …   The Collaborative International Dictionary of English

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  • duration — ► NOUN ▪ the time during which something continues. ● for the duration Cf. ↑for the duration DERIVATIVES durational adjective. ORIGIN Latin, from durare to last …   English terms dictionary

  • Duration — (v. lat.), Abhärtung, Verhärtung …   Pierer's Universal-Lexikon

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  • duration — [n] length of action, event continuance, continuation, continuity, endurance, extent, period, perpetuation, persistence, prolongation, run, span, spell, stretch, term, tide, time; concept 804 …   New thesaurus

  • duration — [doo rā′shən, dyoorā′shən] n. [ME duracioun < ML duratio < pp. of L durare: see DURABLE] 1. continuance in time 2. the time that a thing continues or lasts …   English World dictionary

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