19 Derivation of Duration

This video provides a detailed, step-by-step mathematical derivation of duration and modified duration, explaining their fundamental role in approximating bond price changes in response to yield to maturity fluctuations. It visually illustrates how modified duration acts as a linear approximation of the bond's price curve, highlighting the source of approximation error when yield changes are significant. The explanation walks through the calculus required to arrive at the modified duration formula and demonstrates why it's a practical tool for financial analysis, particularly as a first-order Taylor series expansion. Subscribe to @AxiomTutoringCourses for more in-depth financial mathematics and tutoring.