Convexity

Question 1

What is the convexity of a bond?

Answer 1

A measure of how a bond’s duration changes as interest rates change — it shows the curvature of the price–yield relationship. Higher convexity = less price drop when rates rise

Question 2

How to calculate the convexity?

Answer 2

Formula :

%price change=(-DurationDy)+(1/2 convexityDy^2)

On the bond function:

Sum of : Time to receipt(Time to receipt+1)weight*(1+YTM/2)-2

Question 3

How to calculate approximate convexity?

Answer 3

((pv-)+(pv+)-(2pvo))/(DYield)2Pvo

Question 4

Convexity definition

Answer 4

Curvature of price-yield relationship

Question 5

Convexity benefit

Answer 5

Improves duration estimate

Question 6

Price change formula

Answer 6

–DurΔy + ½Conv(Δy²)

Question 7

Positive convexity

Answer 7

Normal bonds

Question 8

Negative convexity

Answer 8

Callable bonds

Question 9

Money convexity

Answer 9

Convexity × price

Question 10

Portfolio convexity

Answer 10

Weighted average

Question 11

Convexity effect

Answer 11

Larger for big yield changes

Question 12

Callable bond convexity

Answer 12

Negative at low yields

Question 13

Putable bond convexity

Answer 13

Always positive