Modified Duration and PV01

Modified Duration and PV01

Intuition Publishing Pty Ltd
Updated Sep 24, 2020

Modified duration (DM) is a measurement of a bond's dirty price sensitivity given a 1% change in yields. We look at the differences between duration, Macaulay duration and modified duration. The derivation of modified derivation is explored and how it the formula is used. Finally we see why duration estimates have their limitations.