#bonds #duration #finance
Formally, modified duration is a
semi-elasticity, the
percent change in price for a
unit change in yield, rather than an
elasticity, which is a percentage change in output for a
percentage change in input.
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Bond duration - Wikipedia, the free encyclopediage point change in yield per year (for example yield going from 8% per year (y = 0.08) to 9% per year (y = 0.09)). This will give modified duration close to the value of Macaulay duration (and the same when rates are continuously compounded).
<span>Formally, modified duration is a semi-elasticity, the percent change in price for a unit change in yield, rather than an elasticity, which is a percentage change in output for a percentage change in input. Modified duration is a rate of change, the percent change in price per change in yield.
In derivatives pricing ("The Greeks"), the closest analogous quantity is Rho, which is the price elasticity (percentage change in price for percentage change in interest rate), Summary
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