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Home > QFINANCE Dictionary > Definition of modified duration

Definition of

modified duration


measure of interest-rate risk in owning bonds a measure of a bond's sensitivity to changes in interest rates, based on the assumption that interest rates and bond prices move in opposite directions

modified duration - Related Articles
  • Portfolio Analysis: Duration, Convexity, and Immunization


    Duration is a measure of how sensitive the price of bonds are to changes in interest rates (otherwise known as interest rate risk). For example, if interest rates rise 1%, a bond with a two-year duration will fall about 2% in value. Convexity is a measure of how prices rise when yields fall, and can

  • Optimal Long-Term Property and Casualty ALM with Risk Capital Control

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    Cash surpluses generated by contract renewals and new business will partially fund insurance claims (due to pending liabilities from the different insurance lines) and partially fund the investment portfolio. As the amount of P&C policies varies, the insurer will modify its insurance reserves, possibly above the minimum compulsory levels. In normal times technical and financial profits may be regarded as relatively independent of each other
    By Giorgio Consigli, Massimo di Tria

  • Financial Impact of Longevity Risk

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    Explanations for the slow growth include a lack of recognition among pension plan sponsors of longevity risk, a lack of familiarity of the market with longevity risk transfer, the basis risk inherent in most risk transfer instruments, counterparty risk (exacerbated by the long duration of longevity risk and its
    By S. Erik Oppers


Definitions of ’modified duration’ and meaning of ’modified duration’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’modified duration’ and other financial terms with our online QFINANCE Financial Dictionary.

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