Glossary term
Bond duration
Bond duration is a measure used to estimate how sensitive a bond price is to a change in interest rates.
Plain meaning
What duration means
Duration is often expressed in years, but it is not the same thing as the maturity date. In many finance explanations, duration is used as an interest-rate sensitivity measure.
Formula role
How OpenBook uses it
OpenBook calculators use duration to estimate the approximate price effect of a change in yield. A higher duration generally means greater sensitivity to rate changes under the simplified model.
Common limitation
Why the result is approximate
Duration-based estimates simplify the relationship between yields and prices. Actual bond pricing can also depend on convexity, credit risk, call features, liquidity, taxes, and market conditions.