Bond Duration
Bond duration is a measure of the sensitivity of a bond’s price to changes in interest rates. It is expressed as a number of years and is used to measure the volatility of a bond’s price given a change in interest rates. Bond duration is an important concept for investors to understand, as it can help them make more informed decisions about their investments.
History of Bond Duration
The concept of bond duration was first developed by Frederick Macaulay in 1938. Macaulay was an economist who sought to measure the sensitivity of a bond’s price to changes in interest rates. He developed the concept of duration as a way to measure the volatility of a bond’s price given a change in interest rates. Since then, the concept of bond duration has been widely used by investors and financial professionals to measure the risk of a bond investment.
Table of Comparisons
| Bond | Duration (Years) |
|---|---|
| Treasury Bond | 7.5 |
| Corporate Bond | 5.5 |
| Municipal Bond | 4.5 |
Summary
Bond duration is a measure of the sensitivity of a bond’s price to changes in interest rates. It is expressed as a number of years and is used to measure the volatility of a bond’s price given a change in interest rates. Bond duration is an important concept for investors to understand, as it can help them make more informed decisions about their investments. For more information about bond duration, investors can visit websites such as Investopedia, The Balance, and Morningstar.
See Also
- Interest Rate Risk
- Yield to Maturity
- Macaulay Duration
- Modified Duration
- Convexity
- Duration Gap
- Duration-Weighted Average Life
- Key Rate Duration
- Effective Duration
- Option-Adjusted Duration
