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Bond Option-Adjusted Duration

Calculate the Option-Adjusted Duration instantly.

Option-Adjusted Duration

8.00

1Step 1

Call-Adjusted Duration Candidate

Call-Adjusted Duration Candidate=Issuer Call Duration×Issuer Call Relevant Under Stress (0/1)+Contractual Duration×1−Issuer Call Relevant Under Stress (0/1)\textit{Call-Adjusted Duration Candidate} = \textit{Issuer Call Duration} \times \textit{Issuer Call Relevant Under Stress (0/1)} + \textit{Contractual Duration} \times 1 - \textit{Issuer Call Relevant Under Stress (0/1)}
2Step 2

Extension-Adjusted Duration Candidate

Extension-Adjusted Duration Candidate=Extension Duration×Extension Relevant Under Stress (0/1)+Contractual Duration×1−Extension Relevant Under Stress (0/1)\textit{Extension-Adjusted Duration Candidate} = \textit{Extension Duration} \times \textit{Extension Relevant Under Stress (0/1)} + \textit{Contractual Duration} \times 1 - \textit{Extension Relevant Under Stress (0/1)}
3Step 3

Short-Stress Duration

Short-Stress Duration=min⁡(Contractual Duration,Call-Adjusted Duration Candidate)\textit{Short-Stress Duration} = \min(\textit{Contractual Duration}, \textit{Call-Adjusted Duration Candidate})
4Step 4

Long-Stress Duration

Long-Stress Duration=max⁡(Contractual Duration,Extension-Adjusted Duration Candidate)\textit{Long-Stress Duration} = \max(\textit{Contractual Duration}, \textit{Extension-Adjusted Duration Candidate})
5Step 5

Prudent Selected Duration

Prudent Selected Duration=max⁡(Short-Stress Duration,Long-Stress Duration)\textit{Prudent Selected Duration} = \max(\textit{Short-Stress Duration}, \textit{Long-Stress Duration})
6Step 6

Stress Duration Range

Stress Duration Range=Long-Stress Duration−Short-Stress Duration\textit{Stress Duration Range} = \textit{Long-Stress Duration} - \textit{Short-Stress Duration}
7Step 7

Option Duration Governance Gate Flag (0/1)

Option Duration Governance Gate Flag (0/1)=min⁡(Option Terms Evidence Available (0/1),Stressed Assumption Evidence Available (0/1))\textit{Option Duration Governance Gate Flag (0/1)} = \min(\textit{Option Terms Evidence Available (0/1)}, \textit{Stressed Assumption Evidence Available (0/1)})
8Step 8

Option Duration Governance Breach Flag (0/1)

Option Duration Governance Breach Flag (0/1)=1−Option Duration Governance Gate Flag (0/1)\textit{Option Duration Governance Breach Flag (0/1)} = 1 - \textit{Option Duration Governance Gate Flag (0/1)}
9Step 9

Option-Adjusted Duration

Option-Adjusted Duration=Prudent Selected Duration×Option Duration Governance Gate Flag (0/1)\textit{Option-Adjusted Duration} = \textit{Prudent Selected Duration} \times \textit{Option Duration Governance Gate Flag (0/1)}

Understand the Bond Option-Adjusted Duration

Overview

This calculator implements the EIOPA 2026 duration preprocessing control for bonds and loans with issuer options.[1] Where options may shorten or extend maturity, the calculator derives short-stress and long-stress duration candidates so downstream interest-rate and spread-risk calculators can use prudent stressed assumptions.

Input Terms

  • Contractual Duration: The base duration before issuer option behavior is reflected.
  • Issuer Call Duration: The shorter duration that may apply where the issuer is expected to call the instrument under stressed conditions.
  • Extension Duration: The longer duration that may apply where extension features become relevant under stressed conditions.
  • Evidence Flags: Controls confirming that option terms and stressed assumptions are available for audit.

Technical Rationale

EIOPA Guideline 1 requires undertakings to consider options granted to issuers when determining the duration of bonds and loans. Those options can decrease or increase maturity, and the assumptions must be prudent under stressed conditions. This atomistic calculator does not calculate the final spread or interest-rate SCR; it prepares the duration evidence used by those capital calculators.

Important Notes

  • Latest EIOPA update: This page reflects the revised EIOPA Guidelines on market and counterparty risk exposures published on 13 February 2026.
  • Atomistic output: The primary output is an option-adjusted duration, not a standalone SCR.
  • Sensitivity use: Legal and methodological inputs remain editable so users can test option-behavior sensitivities; documentation records the regulatory default expectation.
  • Downstream handoff: Feed the resulting duration into the interest-rate and spread-risk preparation chain for instruments where issuer options are material.

Sources

  1. EIOPA 2026 Guidelines on market and counterparty risk exposures - EIOPA

Default values are illustrative sample inputs for navigation, training, and QA. Replace them with controlled data before using the result in capital analysis, governance, or reporting decisions.