, in the case of a transaction with a non-linear risk profile

Modified and effective duration are related to percentage fair value changes.

The second paper shows how to calculate three types of Duration: Macaulay, Modified, and Dollar Duration.

For a bond with a fixed coupon, modified and Macaulay duration are close and linked by the following relation:

For example: the modified duration of a bond fund is 4.5, the theoretical yield to maturity is 5.3%.

– The modified duration which is the measure of the price sensitivity of the debt portfolio to interest rate changes.

Modified duration is a slightly more involved calculation that takes into account the effects of interest-rate movements.

Modified duration measures the percent change in value of the fixed income portion of the portfolio in response to a 1% change in interest rates.

Weighted average measurable change in the value of a bond portfolio in response to a one-percent change in reference interest rate.

It will handle net future value (NFV), modified internal rate of return (MIRR), modified duration, payback, discount payback, and more.

When delimiting securities categories, the type of issuer, its rating, the residual term and the modified duration must be taken into account.

When delimiting securities categories, the type of issuer, its rating, the residual term and the modified duration must be taken into account.

A 1% increase (decrease) in the interest level accordingly produces a percentage fall (rise) in the price in proportion to the modified duration.

Positions whose modified duration is much longer than the whole portfolios modified duration are not in line with the investment strategy of the AIF and fully matching them should not be allowed.