du·​ra·​tion | \ du̇-ˈrā-shən also dyu̇- \

Definition of duration

1 : continuance in time gradually increase the duration of your workout
2 : the time during which something exists or lasts were there for the duration of the concert

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Examples of duration in a Sentence

You should gradually increase the duration of your workout. for the whole duration of the speech the bored audience fidgeted

Recent Examples on the Web

Last fall, the California Association of Psychiatric Technicians added a $6.50 monthly assessment for members for the duration of President Donald Trump's first term in office. Alexei Koseff, sacbee, "After 'wake-up call' from Supreme Court, California unions face tough political choices," 3 July 2018 The duration of treatment is highly variable depending on the patient. Carolyn L. Todd, SELF, "8 Facts About the Link Between Bipolar Disorder and Psychosis," 7 Dec. 2018 Thursday’s conclusion to the group stage means that 75 percent of the tournament’s games will have been played, even if the duration of the event is less than halfway done. Martin Rogers, USA TODAY, "With champion Germany out, who's the World Cup 'favorite' now?," 27 June 2018 Volcanic activity along the East Rift Zone is expected to increase again, but the future duration and intensity of the new eruption pattern are still unknown. James Burch, National Geographic, "Kilauea Photographers Aid Relief Effort in Hawaii Community," 12 May 2018 This short duration was a crucial swing of momentum in the Capitals’ 4-2 win in Game 1 against the Tampa Bay Lightning. Kristen Nelson, SI.com, "Washington Capitalizes in Game 1 Against Tampa Bay," 11 May 2018 Whether these snow roads will be continued past the duration of CWAT is yet to be seen and much of it depends on the future of ASTAR. Anchorage Daily News, "On the North Slope, snow roads constructed with an eye toward a future Arctic road system," 30 Apr. 2018 Organizers have not explicitly said what the duration of the walkout will be. Ricardo Cano, azcentral, "How long will Arizona's #RedForEd walkout last?," 30 Apr. 2018 Again, the duration and extent of their search is unclear. Hannah Sparling, Cincinnati.com, "Kyle Plush: Questions are piling up about 911, police response," 23 Apr. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'duration.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of duration

14th century, in the meaning defined at sense 1

History and Etymology for duration

see durance

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Last Updated

16 Jan 2019

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The first known use of duration was in the 14th century

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Financial Definition of duration

What It Is

Duration is a measure of a bond's sensitivity to interest rate changes. The higher the bond's duration, the greater its sensitivity to the change (also know as volatility) and vice versa.

How It Works

There is more than one way to calculate duration, depending on one's compounding assumptions, but the Macaulay duration (named after Frederick Macaulay, an economist who developed the concept in 1938) is the most common. The formula is:

t = period in which the coupon is received
C = periodic (usually semiannual) coupon payment
y = the periodic yield to maturity or required yield
n = number periods
M = maturity value (in $)
P = market price of bond

The formula is complicated, but what it boils down to is: Duration = Present value of a bond's cash flows, weighted by length of time to receipt and divided by the bond's current market value. For example, let's calculate the duration of a three-year, $1,000 Company XYZ bond with a semiannual 10% coupon.

Notice in the table above that we first weighted the cash flows by the periods in which the occurred and then calculated the present value of each of these weighted cash flows (also, a measure of 5% is used instead of 10% because payments are semiannual).

To calculate the Macaulay duration, we then divide the sum of the present values of these cash flows by the current bond price (which we are assuming is $1,000):

Company XYZ Macaulay duration = $5,329.48 / $1,000 = 5.33

As mentioned earlier, duration can help investors understand how sensitive a bond is to changes in prevailing interest rates. By multiplying a bond's duration by the change, the investor can estimate the percentage price change for the bond. For example, consider the Company XYZ bonds with a duration of 5.53 years. If for whatever reason market yields increased by 20 basis points (0.20%), the approximate percentage change in the XYZ bond's price would be:

-5.53 x .002 = -0.01106 or -1.106%

Note that this is an approximation. The formula assumes a linear relationship between bond prices and yields even though the relationship is actually convex. Thus, the formula is less reliable when there is a large change in yield.

In general, six things affect a bond's duration:

Bond's Price: Note that if the bond in the above example were trading at $900 today, then the duration would be $5,329.48 / $900 = 5.92. If the bond were trading at $1,200 today, then the duration would be $5,329.48 / $1,200 = 4.44.
Coupon: The higher a bond's coupon, the more income it produces early on and thus the shorter its duration. The lower the coupon, the longer the duration (and volatility). Zero-coupon bonds, which have only one cash flow, have durations equal to their maturities.
Maturity: The longer a bond's maturity, the greater its duration (and volatility). Duration changes every time a bond makes a coupon payment. Over time, it shortens as the bond nears maturity.
Yield to Maturity: The higher a bond's yield to maturity, the shorter its duration because the present value of the distant cash flows (which have the heaviest weighting) become overshadowed by the value of the nearer payments.
Sinking Fund: The presence of a sinking fund lowers a bond's duration because the extra cash flows in the early years are greater than those of a bond without a sinking fund.
Call Provision: Bonds with call provisions also have shorter durations because the principal is repaid earlier than a similar non-callable bond.

Why It Matters

Understanding the duration formula is not nearly as important as understanding that duration is a measure of risk because it has a direct relationship with price volatility. The greater duration of the bond, the greater its percentage price volatility.

By providing a way to estimate the effect of certain market changes on a bond's price, duration can help you choose investments that might better meet your future cash needs. Duration also helps income investors who want to take on minimal interest rate risk (that is, they believe interest rates might rise) understand why they should consider bonds with high coupon payments and shorter maturities.

[Use our Yield to Maturity (YTM) Calculator to measure your annual return if you plan to hold a particular bond until maturity.]

Source: Investing Answers



English Language Learners Definition of duration

: the length of time that something exists or lasts


du·​ra·​tion | \ du̇-ˈrā-shən, dyu̇-\

Kids Definition of duration

: the time during which something exists or lasts The illness is of short duration.

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More from Merriam-Webster on duration

Rhyming Dictionary: Words that rhyme with duration

Thesaurus: All synonyms and antonyms for duration

Spanish Central: Translation of duration

Nglish: Translation of duration for Spanish Speakers

Britannica English: Translation of duration for Arabic Speakers

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a complex dispute or argument

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