"Short duration" would mean your holding increases in value if interest rates increase. Buying a house with a mortgage is "short duration" (you profit if you locked in your rates and rates begin to rise). Duration is a number in years that can be interpreted as the average time of the security.
Similarly one may ask, what does higher duration mean?
Duration is measured in years. Generally, the higher the duration of a bond or a bond fund (meaning the longer you need to wait for the payment of coupons and return of principal), the more its price will drop as interest rates rise.
Also Know, what is duration in market risk?
Duration risk is the risk that changes in interest rates will either increase or decrease the market value of a fixed-income investment. To measure the market price change, you can use this equation: 'Change in Interest Rates x Duration = Change in Market Value.
How do you calculate duration?
The formula is complicated, but what it boils down to is: Duration = Present value of a bond's cash flows, weighted by length of time to receipt and divided by the bond's current market value. As an example, let's calculate the duration of a three-year, $1,000 Company XYZ bond with a semiannual 10% coupon.
What is duration example?
Duration measures the time it takes to recover half the present value of all future cash flows from the bond. For example, a bond with 10 years till maturity and a 7% coupon trading at par to yield 7% has a duration of 7.355 years. At a yield of 6% (price 107 14/32), its duration is 7.461 years.