Bond duration measures the sensitivity of the price of a bond to changes in interest rates, and is thus a measure of the interest rate risk of a bond or of a portfolio of bonds. The higher the duration of a bond, the higher its sensitivity to changes in interest rates.
Duration is measured in years. As an example, if a bond has a duration of five years, then, if its yield declines by 100 basis points, its price will increase by about 5%.
There are various ways of calculating bond duration, and a range of factors that influence its magnitude. The size of the bond coupon payment is one such factor: the higher the coupon, the lower the duration; the smaller the coupon, the higher the duration. In the case of bonds with no coupons, the bond duration is equal to the maturity of the bond.
Another factor that influences the duration of a bond is its maturity: a long-dated bond has a higher duration than a short-dated bond. Moreover, the duration of a bond shortens over time, as it approaches maturity.