Asset Values, Interest-Rate Changes, and Duration

I. A. Cooper

Journal of Financial and Quantitative Analysis, 1977, vol. 12, issue 5, 701-723

Abstract: Much effort has been recently devoted to investigating and expounding the properties of the measure called “duration.” Two properties claimed for duration are (1) that it is a good indicator of the average life of a payments stream and (2) that it measures the elasticity of the present value of such a stream with respect to the discount rate. Unfortunately the theoretical justifications of the second, more important, property have been based upon the analysis of either a change in a discount rate constant for all future time periods, or, more generally, a parallel shift in the term structure of interest rates.

Date: 1977
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