Duration

The sensitivity of a bond's price to a change in yield, expressed in years or as a percentage change per percentage point of yield.

A bond with a modified duration of 6.8 falls about 6.8% in price when yields rise by one percentage point.

Duration rises with maturity and falls with coupon, because a higher coupon returns more of the money sooner. It is also the tool that turns a portfolio of bonds into one number, since portfolio duration is the weighted average of its holdings.

For a bank, the duration mismatch between assets and liabilities is the interest rate risk in the banking book, and it is the mechanism through which rising rates produced losses on long-dated government bonds held at institutions that expected to hold them forever.