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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.
Macaulay duration is a time measure with units in years and really makes sense only for an instrument with fixed cash flows. For a standard bond, the Macaulay duration will be between 0 and the maturity of the bond. It is equal to the maturity if and only if the bond is a zero-coupon bond.
Some believe that these securities carry little interest rate risk [3] because 1) a floating rate note's Macaulay Duration is approximately equal to the time remaining until the next interest rate adjustment; therefore its price shows very low sensitivity to changes in market rates; and 2) when market rates rise, the expected coupons of the FRN ...
Macaulay's method. Macaulay's method (the double integration method) is a technique used in structural analysis to determine the deflection of Euler-Bernoulli beams. Use of Macaulay's technique is very convenient for cases of discontinuous and/or discrete loading.
Duration gap. In Finance, and accounting, and particularly in asset and liability management (ALM), the duration gap is the difference between the duration - i.e. the average maturity - of assets and liabilities held by a financial entity. [1] A related approach is to see the "duration gap" as the difference in the price sensitivity of interest ...
In finance, the weighted-average life (WAL) of an amortizing loan or amortizing bond, also called average life, [1][2][3] is the weighted average of the times of the principal repayments: it's the average time until a dollar of principal is repaid. In a formula, [4] where: is the time (in years) from the calculation date to payment . If desired ...
The resultant of two polynomials with rational or polynomial coefficients may be computed efficiently on a computer. It is a basic tool of computer algebra, and is a built-in function of most computer algebra systems. It is used, among others, for cylindrical algebraic decomposition, integration of rational functions and drawing of curves ...
t. e. 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 ...