The yield elasticity of bond value is the elasticity of the market value of a bond with respect to its yield—the

percentage In mathematics, a percentage () is a number or ratio expressed as a fraction (mathematics), fraction of 100. It is often Denotation, denoted using the ''percent sign'' (%), although the abbreviations ''pct.'', ''pct'', and sometimes ''pc'' are ...

change in bond value divided by its causative percent change in the

yield to maturity The yield to maturity (YTM), book yield or redemption yield of a fixed-interest security is an estimate of the total rate of return anticipated to be earned by an investor who buys it at a given market price, holds it to maturity, and receives ...

of the bond. Equivalently, it is the

derivative In mathematics, the derivative is a fundamental tool that quantifies the sensitivity to change of a function's output with respect to its input. The derivative of a function of a single variable at a chosen input value, when it exists, is t ...

of value with respect to yield times the (interest rate/value). This is equal to the

Macaulay duration In finance, the duration of a financial asset that consists of fixed cash flows, such as a bond, is the weighted average of the times until those fixed cash flows are received. When the price of an asset is considered as a function of yield, du ...

times the discount rate, or the modified duration times the

interest rate An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, ...

. If the elasticity is below -1, or above 1 if the absolute value is used, the product of the two measures, value times yield or the interest income for the period will go down when the yield goes up.

References

{{DEFAULTSORT:Yield Elasticity Of Bond Value Elasticity (economics) Fixed income analysis Bond valuation