Markets · 6 pages · 12 min
Duration estimates how a bond price moves when yield changes, not how long the owner plans to hold.
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Duration, in the sense markets use for risk, is a measure of how sensitive a bond's price is to a change in yield. It is built from the timing and size of the promised cash flows, not from anyone's plan to keep the bond for a season or a decade. The opening covers price sensitivity to yield, not a personal holding plan, and far thin coupons last longer.
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