What is modified duration in SAP FIN-FSCM-TRM-TM - Transaction Manager?

SAP Term: modified duration

• Component: FIN-FSCM-TRM-TM

• Component Name: Transaction Manager

• Description: Key figure for estimating the percentage change in the price of a bond that would result if the market interest rate changed by one percent. The modified duration is calculated as the quotient of the Macaulay duration and the interest rate increase of one percent.

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• Key Concepts: 
  Modified duration is a measure of the sensitivity of a bond's price to changes in interest rates. It is calculated by dividing the Macaulay duration of a bond by one plus the yield to maturity of the bond. The modified duration of a bond is an estimate of the percentage change in the price of a bond for a given change in its yield to maturity. 
  
  How to use it: 
  In SAP Transaction Manager, modified duration can be used to calculate the expected change in the price of a bond for a given change in its yield to maturity. This calculation can be used to determine the optimal timing for buying or selling bonds. 
  
  Tips & Tricks: 
  When calculating modified duration, it is important to remember that it is an estimate and not an exact measure. It is also important to consider other factors such as liquidity and credit risk when making decisions about buying or selling bonds. 
  
  Related Information: 
  For more information about modified duration and other financial concepts, please refer to SAP's Financial Accounting (FI) documentation.