Glossary · market terms in plain English

Duration

A bond’s effective center of gravity, in years: it weighs every payment by when it arrives, where maturity only states when the last one does. In the form traders use (modified duration) it is also the approximate percentage the price moves for each one-point move in yield — a ten-year bond paying a 5% coupon has a duration near 8, so one point of yield is worth roughly 8% of price. Taught in: Bonds and rates →