Macaulay duration formula

Tags: bonds pricing and analysis

Description of the Macaulay duration formula

Formula for the calculation of a bond's Macaulay duration.

D = \frac{\sum_{t = 1}^{N} \frac{t \cdot C_{t}}{{(1 + i)}^{t}}}{\sum_{t = 1}^{N} \frac{C_{t}}{{(1 + i)}^{t}}}

C

Cash flow (coupon or principal)

i

Yield

N

Total number of annuities (number of years times number of payments per year)

t

Time until the payment of the cash flow (full years and year fraction)