convexity

Question 1

convexity

Answer 1

change in price and yields are not linear

price risses more then drops because of convexity

Question 2

mod dur

Answer 2

to the bond value there is a need to add convexity adjustments

%PV=(-modd changeY) +(1/2AnnConv*changeY^2)

Question 3

Approx convexity

Answer 3

((PV-)+(PV+)-2PV0)/changey^2PV0

Question 4

convexity fixed bonds

Answer 4

convexity greater when

1.longer the tenor
2.lower the coupon
3.the lower the ytm
4.the greater dis of CF (monthly itp)

like mod dur