Glossary: FI Module 11 — Duration Measures

Term	Definition
Modified duration	Macaulay duration divided by $(1 + r)$ ; measures % price change per unit yield change
Approximate modified duration	Numerical estimate: $(P V_{-} - P V_{+}) / (2 \times P V_{0} \times Δ y)$
Annual modified duration	Modified duration expressed on an annual basis (periodic ModDur / periods per year already embedded)
Money duration (dollar duration)	Modified duration × full price; gives the absolute dollar price change for a yield change
PVBP (price value of a basis point)	The dollar change in bond price for a 1 bp change in yield: $(P V_{-} - P V_{+}) /2$
DV01 (dollar value of 01)	Synonymous with PVBP; the dollar price change for a 1 basis point yield change
Perpetuity duration	Duration of a perpetuity: $MacDur = (1 + r) / r$ ; $ModDur = 1/ r$
Duration of a zero-coupon bond	Macaulay duration = maturity; modified duration = maturity / $(1 + r)$
Percentage price change	$%Δ P V \approx - ModDur \times Δ y$ (first-order approximation)
Basis point (bp)	One hundredth of a percentage point: 1 bp = 0.01% = 0.0001
Yield beta	The sensitivity of a bond’s yield to a change in the benchmark yield
Duration contribution	The weighted duration that each bond contributes to the portfolio: $w_{i} \times D_{i}$

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