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Convexity

• Is the second derivative of the price/yield curve for a bond.

• Measures the rate of change in a bond's sensitivity to interest rate moves. It's the rate of change in a bond's duration (price volatility).

• The slope of the price-yield relationship for a fixed-income security. Convexity is normally positive but can be negative.

 
 Embedded terms in definition
 Bond
Change
Derivative
Duration
Interest rate
Interest
Security
Yield curve
 
 Referenced Terms
 Effective convexity: The Convexity of a bond calculated with cash flows that change with yields.

 Optimization approach to indexing: An approach to indexing which seeks to Optimize some objective, such as to maximize the portfolio yield, to maximize Convexity, or to maximize expected total returns.

 
 Related Terms
 Effective convexity
Negative convexity
Positive convexity

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