Accurately measure your bond portfolio's sensitivity to interest rate changes.
Enter the Market Value and Duration for up to 5 individual assets to calculate the weighted duration of the portfolio.
Current value of holding
Please enter a positive value.
Effective or Macaulay duration
Must be positive.
Current value of holding
Please enter a positive value.
Effective or Macaulay duration
Must be positive.
Current value of holding
Please enter a positive value.
Effective or Macaulay duration
Must be positive.
Current value of holding
Please enter a positive value.
Effective or Macaulay duration
Must be positive.
Current value of holding
Please enter a positive value.
Effective or Macaulay duration
Must be positive.
Weighted Portfolio Duration
0.00 Years
This means for every 1% change in interest rates, the portfolio value is expected to change by approximately 0.00%.
Total Market Value
$0.00
Total Assets
0
Avg. Weighted Duration
0.00 Yrs
Asset
Value ($)
Weight (%)
Duration (Yrs)
Contrib. to Duration
Note: Contribution = Weight × Duration. The sum of contributions equals the Portfolio Duration.
Chart: Contribution of each asset to total portfolio duration (Years)
What is Calculate the Weighted Duration of the Portfolio?
When investors aim to calculate the weighted duration of the portfolio, they are essentially measuring the aggregated interest rate sensitivity of a collection of fixed-income assets. Unlike equity portfolios where beta measures risk, bond portfolios rely on duration to estimate how price will fluctuate in response to interest rate changes.
The weighted duration is not simply the average duration of the bonds. Instead, it weights each bond's duration by its proportion of the total portfolio value. This metric is critical for portfolio managers, risk analysts, and individual investors who need to match liabilities or manage interest rate risk exposure. If you fail to calculate the weighted duration of the portfolio accurately, you may expose your capital to unexpected volatility when central banks adjust rates.
Common misconceptions include assuming that a portfolio with half long-term bonds and half cash has the same duration as a medium-term bond portfolio. While mathematically the durations might average out, the specific weighted calculation is required to understand the precise price impact.
{primary_keyword} Formula and Mathematical Explanation
To calculate the weighted duration of the portfolio, we use a linear combination formula. The principle relies on the fact that the duration of a portfolio is equal to the weighted average of the durations of the individual components.
The Formula:
Durationportfolio = Σ ( wi × Di )
Where wi is the weight of asset i (Market Value of i / Total Portfolio Value) and Di is the duration of asset i.
Variable
Meaning
Unit
Typical Range
Vtotal
Total Market Value of Portfolio
Currency ($)
> 0
Vi
Market Value of Individual Asset
Currency ($)
> 0
wi
Weight of Asset (Vi / Vtotal)
Decimal/Percent
0% to 100%
Di
Duration of Individual Asset
Years
0 to 30+ Years
Practical Examples (Real-World Use Cases)
Example 1: The Barbell Strategy
An investor holds a "barbell" portfolio to manage liquidity and yield. They have $100,000 in short-term bills (Duration = 0.5 years) and $100,000 in long-term treasury bonds (Duration = 15 years).
Even though half the portfolio is very safe, the weighted duration is high (7.75 years), meaning a 1% rise in rates could drop the portfolio value by roughly 7.75%.
Example 2: Diversified Corporate Bond Fund
A manager wants to calculate the weighted duration of the portfolio consisting of three bonds:
1. Bond A: $2M Value, 4.0 Duration
2. Bond B: $5M Value, 6.0 Duration
3. Bond C: $3M Value, 9.0 Duration
Total Value = $10M.
Weights: A (20%), B (50%), C (30%).
Calculation: (0.2 × 4.0) + (0.5 × 6.0) + (0.3 × 9.0) = 0.8 + 3.0 + 2.7 = 6.5 Years.
How to Use This {primary_keyword} Calculator
Gather Data: Collect the current Market Value and the Duration (typically Modified or Effective Duration) for each holding in your portfolio.
Input Assets: Enter the Name (optional), Market Value, and Duration into the rows provided. The calculator supports up to 5 distinct assets or asset classes.
Review Weights: As you type, the tool will automatically calculate the weight of each asset relative to the total portfolio.
Analyze Results: Look at the "Weighted Portfolio Duration". This single number summarizes your interest rate risk.
Check Contribution: Use the chart and breakdown table to identify which specific assets are contributing the most to your risk. A high-value asset with low duration might contribute less risk than a low-value asset with extremely high duration.
Key Factors That Affect {primary_keyword} Results
Several factors influence the outcome when you calculate the weighted duration of the portfolio:
Coupon Rates: Bonds with higher coupon rates generally have lower durations because more cash flow is received earlier. This lowers the weighted duration of the portfolio.
Time to Maturity: Generally, longer maturity equals higher duration. A portfolio heavily weighted toward long-term debt will have a higher sensitivity score.
Yield to Maturity (YTM): There is an inverse relationship between yield and duration. As yields rise, duration tends to fall slightly, though this is a second-order effect (convexity).
Call Provisions: Callable bonds have lower durations because the issuer may repay the principal early if rates drop, limiting the price appreciation.
Asset Allocation Weights: Rebalancing a portfolio alters the weights ($w_i$). Selling long-term bonds to buy short-term notes is the most direct way to lower portfolio duration.
Floating Rate Notes: Assets with floating rates typically have durations near zero (or equal to the time until the next reset), significantly reducing the overall weighted average.
Frequently Asked Questions (FAQ)
What is the difference between Modified and Macaulay Duration?
Macaulay duration is the weighted average time to receive cash flows. Modified duration adjusts this figure for yield to estimate the percentage price change for a change in yield. For risk management, Modified Duration is the standard input.
Why should I calculate the weighted duration of the portfolio?
It acts as a proxy for risk. If you expect interest rates to rise, you should aim for a lower weighted duration to minimize capital losses. If rates are falling, a higher duration maximizes gains.
Can duration be negative?
Yes, certain derivatives like Interest Only (IO) strips or inverse floaters can exhibit negative duration, meaning their value rises when interest rates rise.
Does this calculator handle cash?
Yes. Enter cash as an asset with a Market Value and a Duration of 0. This will lower the overall weighted duration of the portfolio.
Is portfolio duration just the sum of individual durations?
No. It is the weighted average sum. Simply adding durations would result in a nonsensical number. You must weight them by market value.
How often should I recalculate?
You should recalculate whenever there is a significant change in market values (price drift) or after rebalancing trades, as the weights ($w_i$) change constantly.
What is "Immunization"?
Immunization is a strategy where you match the weighted duration of assets to the duration of liabilities to protect the portfolio's net worth from interest rate moves.
What if my portfolio has options?
For portfolios with embedded options (like mortgage-backed securities), "Effective Duration" is the most accurate input to use in this calculator.
Related Tools and Internal Resources
Expand your financial toolkit with these related calculators and articles:
// Global chart variable
var durationChartInstance = null;
// Helper to format currency
function formatCurrency(num) {
return '$' + num.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}
// Input Validation
function validateInput(input) {
var val = parseFloat(input.value);
var errorDiv = input.parentElement.querySelector('.error-msg');
if (isNaN(val) || val < 0) {
if (input.value !== "") {
errorDiv.style.display = 'block';
input.style.borderColor = '#dc3545';
}
} else {
errorDiv.style.display = 'none';
input.style.borderColor = '#ced4da';
}
}
// Main Calculation Logic
function calculateDuration() {
var totalValue = 0;
var totalWeightedDuration = 0;
var activeAssetCount = 0;
var breakdownData = [];
// Loop through 5 fixed rows
for (var i = 1; i <= 5; i++) {
var nameInput = document.getElementById('name_' + i);
var valInput = document.getElementById('val_' + i);
var durInput = document.getElementById('dur_' + i);
var name = nameInput.value || 'Asset ' + i;
var val = parseFloat(valInput.value);
var dur = parseFloat(durInput.value);
// Handle empty or invalid inputs gracefully (treat as 0)
if (isNaN(val) || val < 0) val = 0;
if (isNaN(dur) || dur 0) {
totalValue += val;
activeAssetCount++;
}
breakdownData.push({
id: i,
name: name,
value: val,
duration: dur
});
}
// Calculate Weights and Contributions
var portfolioDuration = 0;
var tableHTML = ";
var chartLabels = [];
var chartData = [];
for (var j = 0; j 0) {
weight = item.value / totalValue;
contribution = weight * item.duration;
}
portfolioDuration += contribution;
// Only add to table/chart if it has value
if (item.value > 0) {
tableHTML += '