QUICK DEFINITION
Modified Duration is a duration measure that estimates the percentage change in a bond's price for a small change in yield.
WHY IT MATTERS
Why Modified Duration matters in bond markets
It is one of the most widely used practical measures of interest-rate sensitivity.
MARKET CONTEXT
How to think about it
Bond investors use modified duration as part of a wider framework that links prices, yields, cash flows, liquidity and risk. The concept should therefore be read together with its related terms rather than as an isolated definition.
Is Modified Duration important for fixed-income investors?
← Back to the Bond Market Glossary Yes. It is one of the most widely used practical measures of interest-rate sensitivity.