Macaulay Duration - Investment & Finance Definition
A method developed by Frederick Macaulay to measure the interest rate risk of a bond. Macaulay demonstrated that the duration of a bond is a more appropriate measure of the bond’s worth than its time to maturity because duration considers both the repayment of capital at maturity and the size and timing of coupon payments before maturity. The Macaulay Duration is the weighted average of the maturities of the bond’s coupon and its principal repayment cash flows. The weights are the fractions of the bond’s price that occur in each time period.