modified duration

modified duration definition - finance
A measure of the Macaulay Duration adjusted to help estimate a bondÂ’s price volatility. Calculating modified duration gives an estimate of how bond prices would change if interest rates changed a small amount. Measuring the effect that large changes in interest rates would have on bond prices requires examining a bondÂ’s convexity, or the measure of the curvature of the price-yield relationship.

Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.

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