Duration

Duration may refer to:

See also

Duration (philosophy)

Duration (French: la durée) is a theory of time and consciousness posited by the French philosopher Henri Bergson. Bergson sought to improve upon inadequacies he perceived in the philosophy of Herbert Spencer, due, he believed, to Spencer's lack of comprehension of mechanics, which led Bergson to the conclusion that time eluded mathematics and science. Bergson became aware that the moment one attempted to measure a moment, it would be gone: one measures an immobile, complete line, whereas time is mobile and incomplete. For the individual, time may speed up or slow down, whereas, for science, it would remain the same. Hence Bergson decided to explore the inner life of man, which is a kind of duration, neither a unity nor a quantitative multiplicity. Duration is ineffable and can only be shown indirectly through images that can never reveal a complete picture. It can only be grasped through a simple intuition of the imagination.

Bergson first introduced his notion of duration in his essay Time and Free Will: An Essay on the Immediate Data of Consciousness. It is used as a defense of free will in a response to Immanuel Kant, who believed free will was only possible outside of time and space.

Bond duration

In finance, the duration of a financial asset that consists of fixed cash flows, for example a bond, is the weighted average of the times until those fixed cash flows are received. When an asset is considered as a function of yield, duration also measures the price sensitivity to yield, the rate of change of price with respect to yield or the percentage change in price for a parallel shift in yields.

The dual use of the word "duration", as both the weighted average time until repayment and as the percentage change in price, often causes confusion. Strictly speaking, Macaulay duration is the name given to the weighted average time until cash flows are received, and is measured in years. Modified duration is the name given to the price sensitivity and is the percentage change in price for a unit change in yield.

Both measures are termed "duration" and have the same (or close to the same) numerical value, but it is important to keep in mind the conceptual distinctions between them. Macaulay duration is a time measure with units in years, and really makes sense only for an instrument with fixed cash flows. For a standard bond the Macaulay duration will be between 0 and the maturity of the bond. It is equal to the maturity if and only if the bond is a zero-coupon bond.