Macaulay duration adjusted for compounding. The figure for Macaulay duration is divided by the sum of one plus the rate divided by the number of compounding periods per year. A more accurate measure of the weighted average time remaining until receipt of a series of cash flows. In essence, modified duration is a measurement of price and interest rate sensitivity. (Economists refer to this as price elasticity.) Modified duration expresses the percentage change in the value of an instrument for each one percentage point change in prevailing interest rates.
See convexity, duration, effective duration, Macaulay duration, negative duration and positive duration. American Banker Glossary
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The ratio of Macaulay duration to (1 + y), where y = the bond yield. Modified duration is inversely related to the approximate percentage change in price for a given change in yield. Bloomberg Financial Dictionary
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A measure closely linked to duration. Can be used to predict a change in price for a bond given a change in interest rates. Defined as duration divided by (1 + the gross redemption yield of the bond). Dresdner Kleinwort Wasserstein financial glossary
Financial and business terms. 2012.