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short duration position

English translation: short position in duration terms

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13:34 Oct 20, 2002
English to English translations [PRO]
Bus/Financial / Bonds
English term or phrase: short duration position
I'm having trouble interpreting the following sentence from a fund report: "Currently we have an overall short duration position of approximately half a year, due to our short duration position in US Treasuries against an equivalent sized long position in euro-zone bonds."
MirandaM
English translation:short position in duration terms
Explanation:
First of all, the concept of duration has nothing to do with the actual period of time for which an investment is being held. Duration is a measure for the sensitivity of a bond position (or a position in instruments related to bonds, such as bond futures, for example) - the longer the duration, the higher the position risk. Also, for conceptional reasons duration is never used in the context of equities - Macaulay's duration formula comprises the repayment of the bond, whereas equities normally do not provide for repayment of the invested capital (see the URL provided below for a simple definition of Macaulay duration).

A [net] short position denotes a position where net sales exceed net purchases - IOW a position that benefits from falling prices. Although "short duration" is sometimes used to refer to a position with a short duration (= low risk), the key to what is meant here is in the cross-reference to an offsetting long position in euro-zone bonds: the overall position is a spread between US and euro bonds that is set on the yield differential between the two bond markets to widen. (A short position in US bonds benefits when US yields rise; the long position in euro bonds will benefit if euro yields fall - a spread position will benefit if US yields go up relative to euro yields.)

Contact me privately if you need a translation into German...
Selected response from:

Ralf Lemster
Germany
Local time: 15:20
Grading comment
Thanks very much for your help!
4 KudoZ points were awarded for this answer

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Summary of answers provided
5 +1it means an investment for a short period
Libero_Lang_Lab
5 +1short position in duration terms
Ralf Lemster
5situation
Karina Pelech


  

Answers


5 mins   confidence: Answerer confidence 5/5 peer agreement (net): +1
it means an investment for a short period


Explanation:
to hold a short duration position in a particular equity/bond means to invest in that equity/bond for a short period.

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Note added at 2002-10-20 13:45:38 (GMT)
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short-term in investor-speak usually refers to a period of one year or less, often used to refer to bonds or loans.

position is another term for an investment = \"The amount of a security either owned (a long position) or owed (a short position) by an investor or dealer.\" (NB a short term position should not be confused with a short position - that is something completely different!)

see: www.investorwords.com - a useful glossary of investment terminology


Libero_Lang_Lab
United Kingdom
Local time: 14:20
Native speaker of: English
PRO pts in pair: 137

Peer comments on this answer (and responses from the answerer)
agree  Clair@Lexeme
1 hr

agree  airmailrpl: it means an investment for a short time period
3 hrs

disagree  Ralf Lemster: You're right that a short-term position differs from a short position - but I'm afraid this *is* a short position... ;-)
5 hrs
  -> a short duration position is NOT a short position - I have to disagree with your conclusion here
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6 mins   confidence: Answerer confidence 5/5
situation


Explanation:
Basically, what this means is that they don't have much time because of the currency situation.

HTH ... :o)

Karina Pelech
Argentina
Local time: 10:20
Native speaker of: Native in SpanishSpanish
PRO pts in pair: 31

Peer comments on this answer (and responses from the answerer)
neutral  Libero_Lang_Lab: I don't think it does mean this - a short-duration/short-term position is a particular type of investment
1 hr
  -> Hmmm .. it doesn't make sense to me that a phrase as "short term ... IN US treasuries.." would be written if it were a type of investment - but I've been wrong in the past :o) ... saludos igual ... :o)
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5 hrs   confidence: Answerer confidence 5/5 peer agreement (net): +1
short position in duration terms


Explanation:
First of all, the concept of duration has nothing to do with the actual period of time for which an investment is being held. Duration is a measure for the sensitivity of a bond position (or a position in instruments related to bonds, such as bond futures, for example) - the longer the duration, the higher the position risk. Also, for conceptional reasons duration is never used in the context of equities - Macaulay's duration formula comprises the repayment of the bond, whereas equities normally do not provide for repayment of the invested capital (see the URL provided below for a simple definition of Macaulay duration).

A [net] short position denotes a position where net sales exceed net purchases - IOW a position that benefits from falling prices. Although "short duration" is sometimes used to refer to a position with a short duration (= low risk), the key to what is meant here is in the cross-reference to an offsetting long position in euro-zone bonds: the overall position is a spread between US and euro bonds that is set on the yield differential between the two bond markets to widen. (A short position in US bonds benefits when US yields rise; the long position in euro bonds will benefit if euro yields fall - a spread position will benefit if US yields go up relative to euro yields.)

Contact me privately if you need a translation into German...


    Reference: http://www.investorwords.com/cgi-bin/getword.cgi?2911
Ralf Lemster
Germany
Local time: 15:20
Native speaker of: German
PRO pts in pair: 377
Grading comment
Thanks very much for your help!

Peer comments on this answer (and responses from the answerer)
agree  Libero_Lang_Lab: right - you've convinced me. i'll get my coat...
3 hrs
  -> ;-)) Yup, rather cold and nasty out there...
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