Duration
Certified Financial Planner glossary · Certified Financial Planner
Definition
The present-value-weighted average time to receipt of a bond’s cash flows; in modified form, an estimate of price sensitivity to yield.
Duration in plain English
A client asks why a long Treasury can swing harder than a short CD when yields twitch. Duration answers with a time story: it is the present-value-weighted average wait until a bond's cash flows arrive, and in modified form it estimates how much price moves when yields change. Bigger duration usually means more interest-rate sensitivity. Maturity, coupon, and yield can all move the number, but duration is still not "years until maturity" dressed up. It is a cash-flow timing and price-sensitivity measure, not a credit rating or a call feature.
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