effective duration


The duration for a bond with an embedded option when the value is calculated to include the expected change in cash flow caused by the option as interest rates change. This measures the responsiveness of a bond's price to interest rate changes, and illustrates the fact that the embedded option will also affect the bond's price.

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I didn't know what the effective duration was and it was an area that I needed some certainty on fast.

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You need to make sure that you know what the effective duration will be so that you are prepared when the end comes.

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Since it had an embedded option, there was an effective duration on the bond. The duration was predicted to be ten years.

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