What is a Dollar Duration?
Dollar durations are usually described as the product created when assessing the relationship between the duration of a financial instrument with the price or value of the instrument. Calculating the dollar duration helps investors to understand the yield of a given investment, and thus determine if the security is worthy of continuing to be part of the investment portfolio. The process of calculating a dollar duration is especially helpful when dealing with a fixed income investment, such as a bond. A dollar duration is determined by comparing the market value with the product of the investment. This approach helps to measure the change in the yield in the event of a change that amounts to at least one percent in the yield. By calculating this duration from time to time, the investor can determine if the investment is remaining on track, and the desired return that is obtained once the security reaches maturity is still possible. An easy way to understand the dollar duration is to thi
