Financial Terms | |
Modified duration |
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Definition of Modified durationModified durationThe Macaulay duration discounted by the per-period Modified durationThe ratio of Macaulay duration to (1 + y), where y = the bond yield. modified duration is
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. DurationThe weighted average of the time until maturity of each of the DurationThe expected life of a fixed-income security considering its coupon DurationThe time it takes for a policy or annuity to reach maturity. Effective durationThe duration calculated using the approximate duration formula for a bond with an Fully modified pass-throughsAgency pass-throughs that guarantee the timely payment of both interest and Macaulay durationThe weighted-average term to maturity of the cash flows from the bond, where the Macaulay durationA widely used measure of price sensitivity to yield MACRS (Modified Accelerated Cost Recovery System)A depreciation method created by the IRS under the Tax Reform Act of 1986. Companies must use it to depreciate all plant and equipment assets installed after December 31, 1986 (for tax purposes). Modified Accelerated Cost Recovery System (MACRS)Depreciation method that allows higher tax deductions in early years and lower deductions later. modified FIFO method (of process costing)the method of cost assignment that uses FIFO to compute a cost per Modified pass-throughsAgency pass-throughs that guarantee (1) timely interest payments and (2) principal 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.
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