MSDURATION

MSDURATION is a term that appears in financial analysis and pricing tools, but it is not a universally standardized concept in major reference works. Its exact meaning can vary by software vendor, documentation, or context. In many cases, MSDURATION is used informally to refer to duration measures used to gauge a bond’s sensitivity to changes in interest rates. When encountered in documentation, it is important to check the surrounding definitions to determine whether it denotes Macauley duration or modified duration.

If MSDURATION is intended to denote Modified Duration, it represents the price sensitivity of a bond to small changes in yield, expressed in years. Modified duration can be computed from the Macauley duration by dividing by (1 + y/f), where y is the yield per year and f is the number of coupon payments per year. Macauley duration itself is a weighted average of payment times, calculated as D_Ma = sum t * CF_t / (1 + y/f)^t divided by P, with P the present price and CF_t the cash flow at time t.

Price-change approximation: ΔP ≈ -D_Mod * Δy for small yield changes. This relationship links duration to interest-rate risk and is central to many bond pricing and risk-management tools. When encountering MSDURATION in software or literature, verify the exact formula and inputs, including settlement date conventions, yield definition, and basis.

Relation to other terms: Excel and other tools commonly provide DURATION and MDURATION functions for bonds; MSDURATION is not a standard built-in function across all platforms. See also Macauley duration, modified duration, bond price, yield, and duration risk.