Properties of Duration

Now that we understand what duration is, and how it is calculated, let’s take a look at some of the important properties of duration.

  1. Duration of a coupon paying bond is always less than its maturity. For a non-coupon paying bond, the duration is the same as its maturity.
  2. Bonds with longer maturities have longer durations. This is because the coupon payments will be spread over longer periods and will be more affected by inflation.
  3. The bond with higher coupon rates have lower duration, and vice versa.
  4. When the coupon rate is lower than the yield, the duration first increases with maturity to some maximum value then decreases to the asymptotic limit value. As the time to maturity increases to infinity, the duration does not increase to infinity but tends to a finite limit independent of the coupon rate.
  5. The duration of a bond increases immediately on the day a coupon is paid. However, throughout the life of the bond, the duration is continually decreasing as time to the bond’s maturity decreases.

Duration Calculator

Lesson Resources

This excel calculator helps you to calculate the duration and modified duration of a bond.
Learn the skills required to excel in data science and data analytics covering R, Python, machine learning, and AI.

Free Guides - Getting Started with R and Python

Enter your name and email address below and we will email you the guides for R programming and Python.

Saylient AI Logo

Take the Next Step in Your Data Career

Join our membership for lifetime unlimited access to all our data analytics and data science learning content and resources.