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Effective duration |
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Definition of Effective durationEffective durationThe duration calculated using the approximate duration formula for a bond with an
Related Terms:Dollar durationThe product of modified duration and the initial price. DurationA common gauge of the price sensitivity of an asset or portfolio to a change in interest rates. Effective annual interest rateAn annual measure of the time value of money that fully reflects the effects of Effective annual yieldAnnualized interest rate on a security computed using compound interest techniques. Effective call priceThe strike price in an optional redemption provision plus the accrued interest to the Effective convexityThe convexity of a bond calculated with cash flows that change with yields. Effective dateIn an interest rate swap, the date the swap begins accruing interest. Effective margin (EM)Used with SAT performance measures, the amount equaling the net earned spread, or Effective rateA measure of the time value of money that fully reflects the effects of compounding. Effective spreadThe gross underwriting spread adjusted for the impact of the announcement of the common Macaulay durationThe weighted-average term to maturity of the cash flows from the bond, where the Modified durationThe ratio of Macaulay duration to (1 + y), where y = the bond yield. Modified duration is Mortgage durationA modification of standard duration to account for the impact on duration of MBSs of Negative durationA situation in which the price of the MBS moves in the same direction as interest rates. DurationThe weighted average of the time until maturity of each of the Effective Annual YieldAnnualized rate of return on a security computed using compound Effective Interest RateThe rate of interest actually earned on an investment. It is effectivenessa measure of how well an organizationâ€™s goals DurationThe expected life of a fixed-income security considering its coupon Macaulay durationA widely used measure of price sensitivity to yield Modified durationThe Macaulay duration discounted by the per-period effective annual interest rateInterest rate that is annualized using compound interest. Effective Exchange RateThe weighted average of several exchange rates, where the weights are determined by the extent of our trade done with each country. Policy-Ineffectiveness PropositionTheory that anticipated policy has no effect on output. Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit CommitteesA committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial Effective Tax RateThe total tax provision divided by pretax book income from continuing Panel on Audit EffectivenessA special committee of the Public Oversight Board that was created DurationThe time it takes for a policy or annuity to reach maturity.
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