Duration

 

When I was a novice financial translator, a key concept I found pretty hard to understand when talking about bonds was duration. In particular, I tended to mix up the duration of a bond with its maturity. I quickly realised that while these concepts are related, they actually refer to very different things. Grasping the difference between them is crucial for both a bond investor AND a financial translator!

Maturity simply indicates the expiration date of a debt instrument or the length of time, expressed in years, until the principal is paid back to its holder. The same term is also commonly referred to as the time remaining until a debt instrument matures (if a bond fund has an average maturity of 3 years, this means that the average life to maturity of all the bonds it holds is 3 years).

The concept of duration, on the other hand, is far less intuitive. Technically speaking, it measures the average number of years it takes for the price of a bond to be repaid by its internal cash flows. Put more simply, it is an indicator of the interest rate risk of a bond, and is expressed in years. The concept of duration is strictly related to that of modified duration, which indicates the percentage change in the price of a debt instrument in the event of a 1% change in key interest rates.

Translating these terms can be rather challenging, especially for junior and non-specialised translators. This is due not only to the complexity of the concepts conveyed by these words, but also to the fact that those in the know do not always employ them consistently (or correctly), thus making life harder for the translator.

The term “maturity” should not normally cause any particular problem when it has to be translated. However, translating this term is not always straightforward. In fact, investors frequently use the term “duration” when they really mean “maturity”. This is exactly why a word-for-word translation approach is rarely a good idea in our field.

The terms “duration” and “modified duration” pose quite a few challenges to translators – senior ones included – because not all investors and financial writers use these terms to mean the same thing. For example, it is quite common to see the term “duration” employed to mean “modified duration”. On top of that, it is sometimes difficult to guess whether the word “duration” is being used with the meaning explained above, or rather as a synonym for “length of time”. In these cases, only context and experience can help the translator choose the right word (remember that you can quickly find out whether the speaker means “duration” or “modified duration” by checking if the measure is expressed in years or as a percentage change).

In French, the terms “duration” and “sensibilité” are both used to refer to the concept of “duration”. Problematically, though, “sensibilité” is also the equivalent term for “modified duration”. As a consequence, translating the French term “sensibilité” can be a nightmare, especially when the very same word is used to describe two different concepts in one text!

The terms provided in the table overleaf are those usually employed by our financial translators to translate the concepts discussed in this post, but this does not mean that no other translations are possible.

Knowing the equivalent words for “duration”, “maturity” and “modified duration” in another language will not prevent you from making mistakes. The only way to ensure an accurate translation of these terms is to have a clear understanding of the concepts behind them.

Found in translation

Preferred term(s) Alternative term(s) Comments
EN duration
DE Duration
FR duration sensibilité
durée
While it should be reserved for modified duration, “sensibilité” is also often used to mean duration. If the text addresses an audience without technical expertise, you might even consider using a simpler word like “durée”.
IT duration
NL duration
SP duración

Related terms and expressions

Preferred term(s) Alternative term(s) Comments
EN modified duration
DE modifizierte Duration
FR modifizierte Duration duration modifiée See above.
IT duration modificata
NL modified duration
SP duración modificada
EN maturity
DE Laufzeit(1)
Fälligkeit(2)
(1)When referring to the time span between now and the maturity date.
(2)Refers to the date/moment a debt instrument matures.
FR échéance maturité
IT scadenza
NL looptijd(1)
vervaldatum(2)
(1)When referring to the time span between now and the maturity date.
(2)Refers to the date/moment a debt instrument matures.
SP vencimiento





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