Economics
Bond Duration
Quick fact
The longer the duration, the more sensitive a bond's price is to interest rate changes.
Why this is interesting
Did you know that a small change in interest rates can significantly affect the value of your bonds? This is where bond duration comes into play.
Read the full explanation
Understanding Bond Duration
Bond duration is a measure of how much a bond's price will change in response to a shift in interest rates. It essentially tells you how 'long' the bond behaves like it has maturity, helping you gauge its sensitivity to market conditions.
A deeper explanation
Duration reflects the weighted average time until all cash flows from a bond are received. The closer the cash flows are to the present, the less sensitive the price is to rate changes. This helps investors compare different bonds and manage their exposure to interest rate risk effectively.