Properties of Duration
- 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.
- 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.
- The bond with higher coupon rates have lower duration, and vice versa.
- 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.
- 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.
This excel calculator helps you to calculate the duration and modified duration of a bond.
- What is Macaulay Duration?
- Duration of a Bond - Video
- Calculating the Macaulay Duration Using Excel
- Properties of Duration
- Modified Duration of a Bond
- Calculating Price and Yield of a Bond Using Zero Curve
- Price-Yield Relationship
- Current Yield of a Bond
- Basis Point Value (BPV / DV01)
- Quick Approximation of Price Value of a Basis Point (PVBP)
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