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Modified duration

Arka Bose

Active Member
Thread starter #1
mathematically modified duration is equal to maculays duration.
Can anyone show me how,like any derivation or like?
 
#2
Modified duration should always be less than Macaulay duration since:

Modified = Macaulay / [1+ (YTM/n)] where n= number of coupon periods in a year. However, they will be very close. The difference between the two is that Macaulay duration assumes that bond cash flows are fixed. Modified duration does not make this assumption so it can also be applied to bonds with variable cash flows.

Hope this helps.
 

Arka Bose

Active Member
Thread starter #3
I dont think the statement u gave about modified durations and cash flows is correct.
Macaulay Duration does not consider the fact that duration does NOT remain constant and duration changes with level of YTM rates. So,modified duration is computed.
 
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