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Topic: Bond duration

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Macaulay Duration

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	Bond duration - Wikipedia, the free encyclopedia
		Duration is useful as a measure of the sensitivity of a bond's price to interest rate movements.
		That means that the duration gives the opposite of the relative variation of the value of a bond respect to a variation of the rate of the bond, forgetting the quadratic terms.
		Bonds that have embedded options should be analyzed using "effective duration." Effective duration is a discrete approximation of the slope of the bond's value as a function of the interest rate.
	en.wikipedia.org /wiki/Macaulay_Duration (1090 words)

	Zero coupon bond - Wikipedia, the free encyclopedia
		Zero coupon bonds are bonds which do not pay periodic coupons, or so-called "interest payments." Zero coupon bonds are purchased at a discount from their value at maturity.
		The impact of interest rate fluctuations on strip bonds, known as the bond duration, is higher than for a coupon bond.
		This high duration means that these bonds' prices are particularly sensitive to changes in the interest rate, and therefore offset, or immunize the interest rate risk of these firms' long-term liabilities.
	en.wikipedia.org /wiki/Zero_coupon_bond (738 words)

	Invest FAQ:Bonds:Duration Measure
		The duration measure for bonds is a invention that allows bonds of different maturities and coupon rates to be compared directly.
		Duration is a weighted average of the times that interest payments and the final return of principal are received.
		Duration gives one an immediate rule of thumb -- the percentage change in the price of a bond is the duration multiplied by the change in interest rates.
	invest-faq.com /articles/bonds-duration.html (825 words)

	duration Definition
		For example, a 5 year duration means the bond will decrease in value by 5% if interest rates rise 1% and increase in value by 5% if interest rates fall 1%.
		Basically, duration is a weighted average of the maturity of all the income streams from a bond or portfolio of bonds.
		Investors use duration to measure the volatility of the bond.
	www.investorwords.com /1602/duration.html (373 words)

	Bond maturity and duration
		Because interest rate risk is perhaps your most important consideration in bond investing, and since interest rate risk increases with longer-term bonds, looking at the maturity date of a bond is one way to measure risk in bond investments.
		The duration of a bond is related to the maturity of the bond, but the duration is always less than or equal to the maturity of a bond.
		The duration of a bond is a sort of weighted average of all the future payments offered by the bond.
	luhman.org /Man/Bond/110_BondMaturityDuration.html (524 words)

	[No title]
		Duration is a powerful risk hedging tool and is measured in number of years.
		A bond with a duration of 4 years can be used to perfectly hedge a liability arising after 4 years.
		Duration of a deep discount bond is exactly equal to its maturity period.
	www.karvy.com /perfin/durationcalc.htm (95 words)

	fnCentral Presents 401Kafe
		Duration is the average maturity of the fund.
		Shorter-time-horizon bonds would mature and be replaced by newer, higher yielding bonds, yet this gain would not be enough to make up for the value lost in the 4-year duration bonds.
		Bonds with a 2-year duration are currently yielding 6.4%, while bonds with a 6-year duration are yielding 6.6%.
	www.fncentral.com /401k/commentary/lummer/lummer_091100.html (2086 words)

	Class Nine: Bond Strategies and Introduction to Derivative Securities (Site not responding. Last check: 2007-10-13)
		With a bond ladder, the bond portfolio is constructed with a wide range of maturities or duration.
		With a bond barbell, the bond portfolio is constructed to have the majority of the funds invested in short and long duration securities.
		There may be periods when the bonds with the duration that is desired for the portfolio are overvalued.
	www2.una.edu /kvrensselaer/class9.html (2483 words)

	Advanced Bond Concepts
		Duration increases immediately on the day a coupon is paid, but throughout the life of the bond, the duration is continually decreasing as time to the bond's maturity decreases.
		Macaulay duration is calculated by adding the results of multiplying the present value of each cash flow by the time it is received and dividing by the total price of the security.
		Because the modified duration formula shows how a bond's duration changes in relation to interest rate movements, the formula is appropriate for investors wishing to measure the volatility of a particular bond.
	www.investopedia.com /university/advancedbond/advancedbond5.asp (2066 words)

	CMS BondEdge-fixed income portfolio and credit risk analytics
		By determining what the bond’s price would be, given higher/lower interest rate environments, the effective duration measure reflects the increasing or decreasing likelihood of any option exercise, including calls, puts, changes in prepayment speeds for mortgage-backed securities, and the higher probability of encountering any rate caps/floors for securities with adjustable coupons.
		Macaulay’s Duration assumes a bond will always survive to the stated maturity date, regardless of any call or put options, or in the case of a mortgage-backed security, that prepayments will be constant, regardless of a change in interest rates.
		For bonds priced at par, the percentage change and the dollar price change are the same; for bonds priced away from par, a so-called “dollar duration” may be computed that describes the bond’s dollar price change given a change in rates.
	www.cmsbondedge.com /b2b/bb_dur_best.html (1756 words)

	Hussman Funds - Weekly Market Comment: February 23, 2004 - Buy-and-Hold For the Duration?
		For that bond, the duration will always be less than its maturity (for instance, the current 30-year Treasury bond has a duration of only about 15 years).
		You find the duration of a coupon bond by calculating the average date that you receive those payments, where the weight you give to each year is equal to the proportion of the total present value that you receive in that year.
		Since the overall duration of the U.S. bond market is about 8 years, and cash has a duration of zero, the standard allocation implicitly assumes an investment horizon of roughly [.6 x 67 +.3 x 8 +.1 x 0 = ] 42.6 years.
	www.hussmanfunds.com /wmc/wmc040223.htm (2112 words)

	Bond Duration (Site not responding. Last check: 2007-10-13)
		In economics and finance, bond duration is the weighted average maturity of a bond or series of cash flows receieved.
		Notice that the bond's duration is lower than its maturity due to some intermediate cash flow (Rs).
		Generally speaking, the shorter the bond duration, the more efficient the market tends to be, explains Kitces.
	www.pictureprobe.com /bond/bond-duration.html (229 words)

	Bonds 2
		Is a 10-year bond with a 5% coupon more sensitive to interest rate changes than a 10-year bond with an 8% coupon or a 5-year zero-coupon bond or a 7-year 6% bond or a...
		(See Bond Duration for a derivation of the formula as the weighted average of the times when all the coupons AND the value-at-maturity are received).
		Besides, Bond Duration is a generated from a derivative which implies an infinitesimal change in yield...
	www.gummy-stuff.org /bonds-2.htm (649 words)

	[No title] (Site not responding. Last check: 2007-10-13)
		Duration Duration is important for 3 primary reasons: (1) It is a simple summary statistic of the effective average maturity of a bond or a portfolio of bonds.
		Basic idea: suppose that the manager must construct a bond portfolio with a certain duration, and also expects that the volatility of interest rates will be high in the future, perhaps because of economic uncertainty.
		Assuming that the yield to maturity on risk-free bonds falls by 100 basis points, estimate your expected capital loss on the GIC using only its duration and using both its duration and convexity.
	userpages.umbc.edu /~bewilson/courses/475/bonds_risk.ppt (669 words)

	Advanced Bond Concepts
		Modified duration, as we saw in the preceding section of this tutorial, must be used to measure how duration is affected by changes in interest rates.
		A bond with greater convexity is less affected by interest rates than a bond with less convexity.
		Remember that for callable bonds, which we discuss in our section detailing types of bonds, modified duration can be used for an accurate estimate of bond price when there is no chance that the bond will be called.
	www.investopedia.com /university/advancedbond/advancedbond6.asp (881 words)

	Measuring Bond Price Volatility: Bond Duration (Site not responding. Last check: 2007-10-13)
		There are several factors that affect the amount by which the price of a particular bond will fall.
		Bond duration can help us gauge how sensitive a bond price is to changes in interest rates.
		Use the duration calculator at the Investopedia website to determine the duration of each of the following bonds which are priced to yield 10 percent.
	www.obu.edu /business/arye/exploringinv/bondduration.htm (282 words)

	WWWFinance - Duration Measures: Historical Perspective
		The modified duration of a Eurobond showed its interest rate sensitivity to a change in the annualized rate, but a Treasury bond's modified duration showed its sensitivity to a change in the semiannual rate.
		If a callable bond were trading near par, then a small drop in the yield might mean that it would be called in six months -- so it would only have a small increase in value.
		If the bond had fixed cash flows, then the effective duration of a bond with fixed cash flows is just the Macaulay duration divided by (1+i/2).
	www.duke.edu /~charvey/Classes/ba350/bondval/duration.htm (1194 words)

	[No title]
		Calculates the bond duration for the ytm calculated in equation 1
		So, for a bond of 10 years to maturity with a 10% annual coupon presently yielding 8%, the duration is
		Note that all variable values are entered as whole numbers including Y and C. This formula reduces calculating duration on the HP17BII to as few as 11 keystrokes.
	www.hpmuseum.org /cgi-sys/cgiwrap/hpmuseum/archv007.cgi?read=13381 (1071 words)

	Bond duration - Definition from Investor Dictionary - Define meaning of the word Bond duration
		Bond duration - Definition from Investor Dictionary - Define meaning of the word Bond duration
		In economics and finance, bond duration is the weighted average maturity of a bond or series of cash flows received.
		It is useful as a measure of the price sensitivity of a bond to interest rate movements.
	www.investordictionary.com /definition/bond+duration.aspx (244 words)

	Limited Duration Bond Strategy (Site not responding. Last check: 2007-10-13)
		Traditional limited duration bond strategies earn incremental return either by making tactical interest rate bets or by investing heavily in unsecured corporate credit.
		The Limited Duration Bond Strategy is an investment-grade quality strategy that derives alpha from several sources and reduces exposure to concentrated investment risks.
		If you are looking to energize your cash, the Limited Duration Bond Strategy is a strategy for you to consider.
	ssga.com /library/stov/mikeoharaenergizingyourcash20030512/page.html (876 words)

	Bond Duration (Site not responding. Last check: 2007-10-13)
		DURATION = weighted average of the times when all the interest AND the value-at-maturity value are received.
		That means, a weighted average of the numbers 1, 2, 3,...., n (these, after all, are the times we are averaging.) After these many periods all the n payments of $cB AND the maturity value of $B have been received.
		(the present value of the maturity value of the bond)
	www.gummy-stuff.org /bond_duration.htm (159 words)

	Bondsonline: Income Securities Advisor
		When you read reports on bonds and bond mutual funds, you will likely come across two apparently similar terms -- bond maturity and bond duration.
		In this tutorial, we will discuss these concepts, with the focus on duration.
		Let's begin with a brief discussion of basic bond features and concepts.
	www.precision-info.com /bondsonline/tut1150817885-1.html (94 words)

	SIRCO Consultants, Inc. - E-Learning: Bond Duration & Convexity
		SIRCO Consultants, Inc. - E-Learning: Bond Duration & Convexity
		Using modified duration to estimate the effect of interest rate movements on bond prices
		Modified duration and the non-linear relationship between price and yield
	www.sircoconsultants.com /bond_duration.html (72 words)

	Bobsguide - Zoologic, Inc.: Zoologic Online Courses - Fixed Income - Bond Duration (Site not responding. Last check: 2007-10-13)
		This course explains how duration is used to measure different types of risk, including market risk and reinvestment risk, which affect the volatility of bonds.
		After completing this course, you will be able to:
		- Relate a bond's exposure to reinvestment risk and.
	www.bobsguide.com /guide/prod/3-5203.html (88 words)

	[No title] (Site not responding. Last check: 2007-10-13)
		We can use the known yields on zero coupon bonds given maturity matches?
		We can drive the expectations from the theoretical spot rates?
		The required yield of this bond is 8%, and the maturity value is $1,000 If the required yield increases from 8% to 9%, what is the percentage price change due to convexity?
	www.mnstate.edu /sahin/FINC_460_PAM/chapter19.ppt (743 words)

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