Stock Market Glossary
Duration
Measure of the interest-rate sensitivity of a bond or bond fund.
In brief: Measure of the interest-rate sensitivity of a bond or bond fund.
Meaning in practice
The higher the duration, the more strongly a price typically reacts to a change in market interest rates. It is an approximation: credit quality, coupon, remaining maturity and non-parallel yield-curve shifts can change the actual outcome.
Context for investors and traders
For investors, the term becomes practical in the context of objectives, time horizon, risk capacity and costs. A suitable solution can differ between two people even when they consider the same product or metric.
How to use this in practice
Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.
What to keep in mind
Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.
