Duration is a measurement of interest rate risk.
The duration of an asset measures the sensitivity of the asset's price to changes in interest rates.
This can be thought of as the weighted average time (in years) until the cash flows are received (including the par value)
The larger the duration, the more sensitive its price to changes in interest rates.

There are several different types of duration:

  • Macaulay Duration -

  • Modified Duration -

  • Dollar Duration -

The duration of a bond is the term used to indicate how much a bond price will change when interest rates change.

An optimistic investor would buy bonds with a high duration.
An increase in interest rates will reduce the value of the bond.
Delta is the sensitivity to yields / interest rates

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