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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 ...
Frederick Robertson Macaulay (August 12, 1882 – March 1970) was a Canadian economist of the Institutionalist School. He is known for introducing the concept of bond duration . [ 1 ] Macaulay's contributions also include a mammoth empirical study of the time series behavior of interest rates published in 1938 and a study of short selling on ...
Bond duration closed-form formula; Bond equivalent yield; C. Clean price; Coupon (finance) ... Macaulay duration; Maturity (finance) Modified duration; Mortgage yield; N.
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.
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This is equal to the Macaulay duration times the discount rate, or the modified duration times the interest rate. If the elasticity is below -1, or above 1 if the absolute value is used, the product of the two measures, value times yield or the interest income for the period will go down when the yield goes up.