Fixed Income · Core
Macaulay Duration
Macaulay duration is the present-value-weighted average time to receive a bond’s cash flows — duration in years, before the modified-duration hedge ratio.
Definition
MacD = Σ t · PV(CF_t) / Price. A zero’s MacD equals maturity. Coupons shorten it. It is a time, not a P&L.
Why it matters
It is the conceptual core of interest-rate risk. Immunization matching uses it. Trading uses modified duration and DV01.
Case
A 30-year 2% coupon has MacD far below 30. A 30-year zero has MacD = 30. Same maturity, different clock.
How to read it
Convert to modified duration (MacD / (1+y/k)) before you hedge. Do not mix Mac years with DV01 dollars.
Key papers
Landmark references with real publisher or arXiv links — not token-overlap noise.
- Duration and ImmunizationMacaulay / Redington lineage · 1938 · NBERMacaulay’s original duration concept.
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