The duration of a bond is a measure of time (in years) expressing either:
- the weighted average maturity of all discounted bond cash flows (Macaulay duration)
- or, the bond price sensitivity to yield movements (modified duration) For a bond with a fixed coupon, modified and Macaulay durations are close and linked by the following relationship:
Modified duration = Macaulay duration/(1+yield) Duration is widely used to measure risks of fixed income portfolios, either the risk of variation in credit spread or in risk-free rates.
Investments in the aforementioned fund are subject to market fluctuation and risks inherent in investing in securities. The value of investments and the revenue they generate can increase or decrease and it is possible that investors will not recover their initial investment. Source: BNP Paribas Asset Management Holding.