Why is the time period the duration of the deriivative? Says 1 year is duration = 1?
The duration seems to have two uses.Macaulay’s duration tells you the weighted average time until repayment of the bond.(e.g.for zero coupon bonds with only one Cashflow,the macaulay duration is equal to the maturity of the bond).Modified duration represents the senstitivity of Bond price to small changes in yield (parallel changes in yield curve). I suppose at level 3 the authors are too lazy to make this distinction explicit…