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In finance, the duration of a financial asset that consists of fixed cash flows, such as a bond, is the weighted average of the times until those fixed cash flows are received. When the price of an asset is considered as a function of yield , duration also measures the price sensitivity to yield, the rate of change of price with respect to ...
The duration of an equity is a noisy analogue of the Macaulay duration of a bond, due to the variability and unpredictability of dividend payments. The duration of a stock or the stock market is implied rather than deterministic. Duration of the U.S. stock market as a whole, and most individual stocks within it, is many years to a few decades.
In finance, bond convexity is a measure of the non-linear relationship of bond prices to changes in interest rates, and is defined as the second derivative of the price of the bond with respect to interest rates (duration is the first derivative). In general, the higher the duration, the more sensitive the bond price is to the change in ...
Formally, the duration gap is the difference between the duration - i.e. the average maturity - of assets and liabilities held by a financial entity. [3] A related approach is to see the "duration gap" as the difference in the price sensitivity of interest-yielding assets and the price sensitivity of liabilities (of the organization) to a change in market interest rates (yields).
Duration (finance) – the weighted average time until the various cash flows from a security, such as a bond, are received; Duration (music) – an amount of time or a particular time interval, often cited as one of the fundamental aspects of music; Duration (philosophy) – a theory of time and consciousness first proposed by Henri Bergson
Quantum finance involves applying quantum mechanical approaches to financial theory, providing novel methods and perspectives in the field. [40] Quantum finance is an interdisciplinary field, in which theories and methods developed by quantum physicists and economists are applied to solve financial problems. It represents a branch known as ...
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This theory is also called the segmented market hypothesis. In this theory, financial instruments of different terms are not substitutable. As a result, the supply and demand in the markets for short-term and long-term instruments is determined largely independently. Prospective investors decide in advance whether they need short-term or long ...