Duration and bond price volatility average time to maturity (measured in years) on a financial security the sensitivity (or elasticity) of a fixed-income security's price to small interest rate changes Po Current price of the security t1 to T, the period in which a cash flow is received the number of years to maturity CFi cash flow received at end of period t r a yield to maturity or required rate of return = present value of cash flow received at end of period t Example : 6% Coupon, 4 year maturity annual payment bond with a 5% ytm Year Cash Flows (CF) 1/(1+0.05) PV of CF PV of CFxt Duration =