Duration

The duration indicates the average capital commitment of a bond. Through interest payments, part of the tied-up capital already flows to the creditor before the repayment date. The higher the coupon and the shorter the maturity, the shorter the duration. The longer the duration of a bond, the more strongly its price reacts to changes in the interest rate level. There are various methods for calculating duration which can be interpreted differently (see Modified Duration or Macaulay Duration).