Effective Duration

Business, Legal & Accounting Glossary

Definition: Effective Duration


Effective Duration

Quick Summary of Effective Duration


The duration for a bond with an embedded option when the value is calculated to include the expected change in cash flow caused by the option as interest rates change. This measures the responsiveness of a bond’s price to interest rate changes, and illustrates the fact that the embedded option will also affect the bond’s price.




Examples of Effective Duration in a sentence


I didn’t know what the effective duration was and it was an area that I needed some certainty on fast.

You need to make sure that you know what the effective duration will be so that you are prepared when the end comes.

Since it had an embedded option, there was an effective duration on the bond. The duration was predicted to be ten years.


Cite Term


To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
https://payrollheaven.com/define/effective-duration/
Modern Language Association (MLA):
Effective Duration. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
April 20, 2024 https://payrollheaven.com/define/effective-duration/.
Chicago Manual of Style (CMS):
Effective Duration. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
https://payrollheaven.com/define/effective-duration/ (accessed: April 20, 2024).
American Psychological Association (APA):
Effective Duration. PayrollHeaven.com. Retrieved April 20, 2024
, from PayrollHeaven.com website: https://payrollheaven.com/define/effective-duration/

Definition Sources


Definitions for Effective Duration are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 30th October, 2021 | 0 Views.