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 priceyield relationship for a fixedincome 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
