Bond Duration
Definition
A measure of a bond's sensitivity to interest rate changes, expressed in years. Also represents the weighted average time to receive all cash flows.
Explanation
Duration is the single most important risk metric in fixed income. A bond with duration of 5 years will lose approximately 5% in value if interest rates rise 1%. Modified duration refines this estimate for non-zero yields. Effective duration accounts for embedded options (callable bonds). Convexity captures the non-linear relationship between price and yield changes for larger rate moves. Portfolio managers use duration to control interest rate risk exposure.
How Stoquity Uses This
Stoquity incorporates bond duration analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.