modified duration

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modeling
modern portfolio theory
Modified ACRS
modified book value
modified cash basis
modified duration
modified pass-through
modus operandi
mogul
Moldova Lei
Momentum

Modified Duration is a formula used to express the measurable change in a securities’ value following a change in interest rates. It is calculated as:

Modified Duration =	Macaulay Duration
	[1+(YTM/n)]

Where:
• n = number of coupon periods per year

• YTM = the bond’s yield to maturity

An assumption implied by the Modified Duration equation is that real interest rates and bond prices move in opposite directions. The formula shows that a positive moment in real interest rates will drop bond prices a specified amount.