The weighted average time to receipt of all cashflows, including coupon payments, on a present value basis. For corporate bonds, cashflows to the stated maturity date are used, regardless of any options features. For mortgage-backed securities (pass-throughs, C.M.O.s and A.R.M.s), cashflows are derived from the PSA/CPR for the security.

Macaulay's duration divided by 1 plus the periodic rate of interest.

An adjusted version of a simple duration measure (for example a Macaulay duration), which takes into account the distortion caused by the redemption yield. See effective duration. Moody's Investors Service A US credit rating agency. See credit rating.

a measure of the proportional change in the value of an instrument that results from a change in interest rates, ie, it shows a security's sensitivity to interest rates.

A measure of the price sensitivity of a bond to interest rate movements. Equal to the Macaulay Duration divided by [1+ (bond yield/k)] where k is the number of compounding periods per year. It is therefore inversely proportional to the approximate percentage change in price for a given change in yield. This is one of two ways to calculate duration, the other being Macaulay duration.

Modified duration is the price sensitivity of a bond to a 1% move in interest rates. Longer duration bonds will generally experience bigger price swings than shorter duration bond when interest rates rise or fall.

Is considered a more accurate representation of a bond's weighted cash flow stream. This statistic adjusts the Macaulay Duration by taking into account the yield in the market and the frequency of coupon payments in a year. Modified Duration is less than the standard duration. It is computed as: Modified Duration = ________ Duration ________________ ( 1 + yield in market/coupons in year)

A measure of the sensitivity of the market value of a debt security to a change in interest rates. It is measured as the percentage change in the market value of a debt instrument in response to a one percentage point change in nominal interest rates. Modified duration is also closely related to the weighted average term to repricing. Portfolios with higher modified durations have more stable interest costs through time but have a more volatile market value through time.

An indication of price sensitivity. It is equal to a security's Macaulay duration divided by 1 plus the yield.

(Durée modifiée) More precise measure of a bond price's sensitivity to changes in interest rates. It is equal to the duration divided by 1 + the yield at maturity.

A measure closely linked to duration. Can be used to predict a change in price for a bond given a change in interest rates. Defined as duration divided by (1 + the gross redemption yield of the bond).

This is a measurement of risk which allows us to measure how sensitive bond funds are to changes in interest rates (here it is the actuarial market rate) The sensitivity expresses the relative variation in the fund yield for an absolute variation in the interest rate of 1%. E.g.: if the modified duration of a bond fund is equal to 5.3 and the actuarial rate to 5 a fall (rise) in the rate to 4% (6%) implies a rise (fall) in the fund yield of 5.3%. The higher the modified duration, the more sensitive the bond fund is to changes in rates.

a measure of the sensitivity that the value of a fixed-income security has to changes in market rates of interest. Modified duration is the best single measure of a portfolio's or security's exposure to market risk. Modified duration identifies the potential gain/loss in value before the gain/loss actually occurs. It is a prospective measurement, e.g., a modified duration of 1.5 indicates that when and if a 1% change in market interest rates occurs, a 1.5% change in the value of a security will result. Investments with modified durations of one to three are considered to be relatively conservative.

Interest rate sensitivity resulting from small fluctuations in the yield to maturity of a bond.

The percentage price change of a security for a given change in yield. The higher the modified duration of a security, the higher its risk.

A formula that expresses the measurable change in the value of a security in response to a change in interest rates. Calculated as the following

The ratio of Macaulay duration to (1 + y), where y = the bond yield. Modified duration is inversely related to the approximate percentage change in price for a given change in yield.

money market moral obligation bond