Modified duration
Definition · Level 7 · Futures, rates & macro
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Approximate % price change for a 100 bp yield move: Macaulay ÷ (1 + y/k), with k coupons per year. %ΔP ≈ −(this number) × Δy.
Example
At 7, a 50 bp rise costs about 3.5%.
Where Tradecraft teaches it
Level 7 · Futures, rates & macro, in the lesson “Duration, DV01 & convexity”: Measure interest-rate risk: how many dollars you make or lose per basis point.
Related terms
- Bond convexityCurvature of the price–yield relationship.
- DV01Dollar value of a basis point: a position's dollar P&L for a 1 bp yield change ≈ modified duration × market value × 0.0001.
- Macaulay durationWeighted-average time, in years, until a bond's cash flows arrive, each weighted by its present value.
- 2s10sThe 10-year Treasury yield minus the 2-year yield, in bp: the headline gauge of curve slope.
- BackwardationCurve shape where later-dated futures trade below nearer ones.
- Base currencyThe first currency in an FX pair, the one being priced.