Loan term is a concept that describes the main time characteristics of cash payment flow (such as bonds and mortgage loans) being superior to maturity.

Duration is an indicator of the sensitivity of bond prices to interest rate changes, and it can also be regarded as an indicator of the time required for investors to recover bond investment funds. The longer the duration, the more sensitive the bond price is to the change of interest rate. The duration and maturity of bonds are different concepts, and the maturity also reflects the sensitivity of bonds to interest rate risk to some extent. Other things being equal, the longer the term, the more sensitive the price is to the change of interest rate. However, because the sensitivity of bond price to interest rate risk is influenced by coupon rate, interest payment frequency and maturity date, only maturity date is not a good indicator of bond sensitivity to interest rate risk.

Duration is an index calculated by combining various factors that affect the sensitivity of bond prices to interest rate changes. With this concept, the sensitivity of various bonds and bond portfolios to interest rate risk has a simple, direct and comparable measure.

Two. Term of small business loan

The duration of an enterprise is the time period during which an enterprise exists and continues to operate, and it is a term used to express the duration of an enterprise. The legal term of existence refers to the term of validity of a contract or right, that is, it is legally valid or agreed to be valid within this period.

Three. Calculation method of loan term

Macaulay's duration is measured in years. For example, both coupon rate and the market yield are 8%, and the duration of the 10-year bond with interest paid once every six months is 7.24 years. Taking D as the duration, every time the market interest rate changes 1 percentage point, the bond price will change by d% (the interest rate rises and the price falls; Prices rise when interest rates fall). It can be seen that the longer the duration of a bond (or bond portfolio), the higher the risk. If the interest rate is expected to fall, it is a rational strategy to adjust the bond portfolio to extend the duration (which can be achieved by increasing the proportion of long-term debt), because once the interest rate really falls, the price of the bond portfolio will rise sharply. Of course, if the judgment is wrong, the price will be heavier.

The term of zero coupon bond that does not pay interest before maturity is equal to the number of years after the maturity of the bond. The maturity of all bonds that pay interest before maturity is shorter than the number of years after maturity. In addition, other things being equal, the higher the coupon rate, the shorter the maturity of bonds.

Since bonds are paid before maturity (except zero coupon bond), such payment affects the present value of cash flow and the sensitivity of bond prices to interest rates. Duration not only considers the length before maturity, but also considers the payment in advance. Therefore, duration can be regarded as a measure of the average life of bonds or mortgages.

Stocks have no duration, while closed-end funds have duration, that is, when they can continue to exist, they will be liquidated after the duration is over. For example, in 2008, the duration of a fund was 65438+ 1, so when this time comes, the fund will sell its own shares, turn them into cash, and distribute them to fund holders after deducting relevant expenses according to the net value. But now closed-end funds are common.

Warrants have a certain exercise period, and the transaction will be terminated upon expiration. Therefore, investors should pay close attention to and understand the duration of warrants in time through various channels, such as warrant issuance instructions, listing announcements and prompt announcements issued by warrant issuers, so as to avoid losses caused by the failure to sell or exercise warrants.