18 Modified Duration

This video explains how to calculate the approximate change in a bond's price due to changes in its yield to maturity using modified duration. We'll review the concept of Macaulay duration and introduce modified duration as a linear approximation tool. Using a practical example, we demonstrate how to calculate modified duration and then apply it to estimate price changes. We'll also explore the accuracy of this approximation and when it becomes less reliable with larger yield shifts. Subscribe to @AxiomTutoringCourses for more finance tutorials.