Modified Duration
- Social Sciences -
Finance & Accounting Dictionary
Definition
A markets and valuation concept defining how assets are priced and assessed using cash flows, risk measures, or relative benchmarks. It governs estimation of value, required return, and sensitivity to rate or spread changes across asset classes. It does not guarantee accuracy and depends on input quality, market liquidity, and the suitability of benchmarks and assumptions.
Modified Duration
Social Sciences Dictionary
Definition
A bond-price sensitivity measure equal to the negative percentage change in price per unit change in yield for small parallel shifts in the yield curve; numerically, modified duration is Macaulay duration divided by (1 + yield per period) and serves as a first-order (linear) approximation to price changes.