Duration is an indicator of the sensitivity of bond prices to interest rate changes, and it can also be regarded as an indicator of the time required for investors to recover bond investment funds. The longer the duration, the more sensitive the bond price is to the change of interest rate. ?
The duration and maturity of bonds are different concepts, and the maturity also reflects the sensitivity of bonds to interest rate risk to some extent. Other things being equal, the longer the term, the more sensitive the price is to the change of interest rate. However, because the sensitivity of bond price to interest rate risk is influenced by coupon rate, interest payment frequency and maturity date, only maturity date is not a good indicator of bond sensitivity to interest rate risk.
Extended data:
The role of bond maturity:
The term of zero coupon bond that does not pay interest before maturity is equal to the number of years after the maturity of the bond. The maturity of all bonds that pay interest before maturity is shorter than the number of years after maturity. In addition, other things being equal, the higher the coupon rate, the shorter the maturity of bonds.
From the practical application point of view, because the duration of the bond market is an important basis for buying and selling quotations, that is, under the same liquidity and tax burden, the market requires one interest-bearing bond to have the same yield as another zero coupon bond bond with the same duration.
Estimation of yield curve as zero coupon bond. Therefore, through this adjustment method, the relationship between the yield of interest-bearing bonds and their duration can be described as a curve of long-term fixed yield, which can be regarded as an estimated value of the yield curve of zero-coupon bonds.
Baidu encyclopedia-duration
Baidu encyclopedia-duration