Quick Answer: What Does Duration Mean?

What does duration mean on a job application?

Period required to complete an activity, job, or task, usually excluding holidays and other non-working days.

Period a fixed-income security (such as an interest bearing bond) will take to recover the investment (principal and interest) in present value terms..

How do you use the word duration?

Use “duration” in a sentence | “duration” sentence examplesMany foreigners were interned for the duration of the war.They were incarcerated for the duration of the war.The course is of three years’ duration.I’m stuck here for the duration.We took four trains, and the overall duration of the journey was 72 hours.

How long is a duration?

In music, duration is an amount of time or how long or short a note, phrase, section, or composition lasts. “Duration is the length of time a pitch, or tone, is sounded.” A note may last less than a second, while a symphony may last more than an hour.

What is the difference between duration and maturity?

In plain English, “duration” means “length of time” while “maturity” denotes “the extent to which something is full grown.” When bond investors talk about duration it has a very specific meaning: The sensitivity of a bond’s price to changes in interest rates.

What does time duration mean?

The noun duration has come to mean the length of time one thing takes to be completed. The duration of something might be known or not — in past times, the unknown length of time the current war would last was called “the duration.

What is definition of duration?

Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. A bond’s duration is easily confused with its term or time to maturity because they are both measured in years.

What is duration risk?

Duration risk is the risk that changes in interest rates will either increase or decrease the market value of a fixed-income investment. Because payments are typically fixed, if the interest rate changes, then the market value of the investment will change.

What is duration formula?

What is Duration Formula? The formula for the duration is a measure of a bond’s sensitivity to changes in interest rate and it is calculated by dividing the sum product of discounted future cash inflow of the bond and a corresponding number of years by a sum of the discounted future cash inflow.

What is another word for duration?

What is another word for duration?timelengthperiodstretchtermcontinuanceextentspanspellcontinuation43 more rows

What is effective duration?

Effective duration is a duration calculation for bonds that have embedded options. … The impact on cash flows as interest rates change is measured by effective duration. Effective duration calculates the expected price decline of a bond when interest rates rise by 1%.

Why is duration in years?

Duration is measured in years. Generally, the higher the duration of a bond or a bond fund (meaning the longer you need to wait for the payment of coupons and return of principal), the more its price will drop as interest rates rise.

How do you interpret Macaulay duration?

The Macaulay duration can be viewed as the economic balance point of a group of cash flows. Another way to interpret the statistic is that it is the weighted average number of years an investor must maintain a position in the bond until the present value of the bond’s cash flows equals the amount paid for the bond.

What is the duration of cash?

Valuethinker wrote: magician wrote: Cash is probably best viewed as a floating-rate bond; hence, essentially zero duration. (For most floating-rate bonds, the duration is usually given as half the time between coupon reset dates.)

What does negative duration mean?

1. A situation in which the price of a bond or other debt security moves in the same direction of interest rates. That is, negative duration occurs when the bond prices go up along with interest rates and vice versa. 2. In banking, a situation in which the duration of a bank’s liabilities exceeds that of its assets.

What is duration example?

Duration is an approximate measure of a bond’s price sensitivity to changes in interest rates. … For example, a bond with 10 years till maturity and a 7% coupon trading at par to yield 7% has a duration of 7.355 years. At a yield of 6% (price 107 14/32), its duration is 7.461 years.

How do you write duration?

The maximum time period allowed is 365 days, 23 hours, 59 minutes, and 59 seconds. You might be tempted to write the time in ISO notation (23:59:59), but this is usually used to indicate a point in time, not a duration.

What is spread duration?

Spread duration is the sensitivity of the price of a security to changes in its credit spread. The credit spread is the difference between the yield of a security and the yield of a benchmark rate, such as a cash interest rate or government bond yield.