Macaulay Duration: Bond Cash Flows and Value Weights
Summary
Hollow Point Trading shares a lesson on how Macaulay duration measures the timing of bond cash flows using present-value weights rather than averaging payment dates equally. A hypothetical two-year bond with $100 principal, $10 annual coupons, and a 10% discount yield illustrates why this distinction matters for fixed-income analysis.
https://youtu.be/QexH3G0wvhg
Bond cash-flow timing uses value weights, not equal dates #Macaulay...
Macaulay duration is not simply the average of the payment dates. Consider a hypothetical two year bond with one hundred dollars of principal, ten dollar annual coupons, and a ten percent annual discount yield. Assume valuation immediately after a coupon, scheduled payments, no default and no embedded option. At year one, the ten dollar coupon h...
