Effective Duration Calculator
Finite-difference estimate of interest rate sensitivity
How to Use This Calculator
Enter P-, P+, P0, and the yield shift in bps. The output is the effective duration.
Formula
Duration = (P− − P+) / (2 × P0 × Δy)
Where Δy is the decimal yield change (bps/10000).
About Effective Duration
Captures price sensitivity allowing for cash flow changes (e.g., with embedded options) using a small parallel shift in yields.
Frequently Asked Questions
Why use bps for Δy?
Basis points (1/100 of 1%) are standard for small yield shifts.