Documentation/How Tos/Calc: MDURATION function

MDURATION

Returns the modified Macaulay duration of a security.

This function is only available if the Analysis AddIn is installed.

Syntax:

MDURATION(settlementdate; maturitydate; rate; yield; frequency; basis)

settlementdate: the settlement (purchase) date of the bond.

maturitydate: the maturity (redemption) date of the bond.

rate: the (annual) interest rate of the bond.

yield: the (annual) yield of the bond.

frequency: the number of interest payments per year (1, 2 or 4).

basis: is the calendar system to use. Defaults to 0 if omitted.

0 - US method (NASD), 12 months of 30 days each

1 - Actual number of days in months, actual number of days in year

2 - Actual number of days in month, year has 360 days

3 - Actual number of days in month, year has 365 days

4 - European method, 12 months of 30 days each

This function returns the modifed Macaulay duration of a security, which is a measure of price volatility and interest rate sensitivity. It returns:

Macaulay_duration / (1 + yield/frequency)

The Macaulay duration is returned by the DURATION_ADD function. See that description for further details.

Example:

MDURATION("2008-2-28"; "2010-8-31"; 5%; 6%; 2; 0)

returns approximately 2.33 years.

Issues:

• This function uses YEARFRAC in the calculation. There are known slight inaccuracies (both in Calc and in Excel) in YEARFRAC.