Bond duration
A measure of a bond price's approximate sensitivity to changes in interest rates.
Definition
A measure of a bond price's approximate sensitivity to changes in interest rates.
Why this concept matters
It makes interest-rate risk more tangible.
How it works
More distant cash flows react more strongly to a change in the discount rate. A long or low-coupon bond therefore often has a higher duration.
Calculation guide : Approximate price change ≈ −duration × rate change
What to watch
Duration is an approximation and does not capture credit or liquidity risk.
Simple example
A duration of 6 suggests that a one-point rate rise could reduce the price by about 6%.
Example currency : France (EUR). The reference country controls the example currency.
Related concepts
Explore the guides →