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What it calculates: Modified Duration, Est. Price Move (Yield +0.25%), Est. Price Move (Yield +1%), Est. Price Move (Yield −1%).
Updated 5 June 2026 · Transparent assumptions
Dividing by one plus the periodic yield is the whole adjustment
Modified duration is Macaulay duration divided by one plus the yield per period: 4.46 / 1.06 = 4.21. That single division converts a time measure into a sensitivity measure, and the result reads directly as the percentage price change for a one point move in yields.
The frequency matters in that divisor. For a semi-annual bond the yield is halved before dividing, which makes the adjustment smaller and modified duration closer to Macaulay. Using the annual yield on a semi-annual bond overstates the adjustment and understates the risk.
Minus 4.21% up, plus 4.21% down — but actual bonds do better than that
The calculation reports the same magnitude in both directions because it is a linear approximation. Real bond prices are convex: a one-point fall in yields raises the price by slightly more than 4.21%, and a one-point rise lowers it by slightly less.
That asymmetry favours the holder and grows with the size of the move and the length of the bond. For a one-point move on a five-year bond it is a rounding difference. For a three-point move on a thirty-year bond it is substantial, and ignoring convexity there materially overstates the loss.
Multiply by the position size and you have the money at stake
Modified duration expressed against an actual holding gives the cash impact directly: 4.21% of a $100,000 position is $4,210 per percentage point of yield. Traders usually work in basis points — DV01, the value of one basis point, is that figure divided by a hundred, or $42.10 here.
That conversion is what turns a bond statistic into a risk limit. A desk with a DV01 limit is constraining how much money moves per basis point, regardless of which bonds produce it, and duration is simply the per-bond input to that calculation.
Credit, call features and the shape of the yield curve
Duration measures sensitivity to a parallel shift in yields — every maturity moving by the same amount. Real curves twist and steepen, and a portfolio with the right overall duration can still lose money if the curve moves in a shape it was not positioned for.
It also assumes the cash flows are fixed. A callable bond’s duration shortens as yields fall and the call becomes likely, which is negative convexity and the opposite of what a holder wants. And none of this addresses credit: a bond whose issuer deteriorates falls for reasons duration cannot see.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Returns are assumptions, not guarantees. Actual results may vary because of market performance, taxes, fees, inflation, and timing. This is an educational projection, not investment advice.
Published the calculator with its formula, worked example, assumptions, limitations and a bespoke guide, and added an automated formula test suite covering it.
Tested the conversion from Macaulay to modified duration and the estimated price change for a one-point yield move.
Tested that the estimate is symmetric in sign and that a higher yield always produces a smaller modified duration for the same Macaulay figure.
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