Duration

Duration is the number of years it takes for an investor to be repaid by the total cash flows of a bond. Duration can also be used to assess the price sensitivity of a bond or fixed income portfolio to changes in interest rates. Because many forms of duration measurements are also computed in years, the length of a bond is frequently confused with its term or time to maturity. However, the number of years until a bond's principal is repaid is a linear measure which is independent of interest rate fluctuations. When compared to maturity time, duration is nonlinear and increases at an ever-increasing rate.