convexity

Learning Objectives: Describe a one-factor interest rate model and identify common examples of interest rate factors. Calculate the DV01, duration, and convexity of a portfolio of fixed-income securities. Describe an example of hedging based on effective duration and convexity. Questions...

Which is nearest to, respectively, the effective duration and effective convexity of a 15- year bond that pays a 9.0% semi-annual compound and yields 12.0% per annum with semiannual compounding?

What is the convention when plotting Duration/Convexity graph, Price is in the X axis or in the Y axis? From what I have seen they graph Yield on the x-axis when plotting duration/convexity but I read somewhere that David explained that price determines the yield and not viceversa; so price...

Learning objectives: Calculate the Macaulay duration, modified duration, and dollar duration of a bond. Evaluate the limitations of duration and explain how convexity addresses some of them. Calculate the change in a bond’s price given its duration, its convexity, and a change in interest rates...

In this video, I'm going to try to illustrate all of the important ideas that are in Tuckman's Chapter 8: The Evolution of Short Rates and the Shape of the Term Structure. This chapter discusses the shape of the term structure and the key influences on the shape of the spot rate term structure...

In this playlist, David has already recorded at least ten videos on duration and convexity which are the two most common measures of single-factor interest rate risk. So, in this video, we wrap it up in one simple explanation that tries to illustrate both duration and convexity and how we apply...

Duration plus a convexity adjustment is a good estimate (approximation) of the bond's price change. We can express this change in percentage terms(%) as given by ΔP/P = -D*Δy + 0.5*C*(Δy)^2; or we can express this in dollar terms ($) as given by ΔP =∂P/∂y*Δy + 0.5*∂^2P/∂y^2*(Δy)^2.

Learning objectives: Explain the process of calculating the effective duration and convexity of a portfolio of fixed income securities. Explain the impact of negative convexity on the hedging of fixed income securities. Construct a barbell portfolio to match the cost and duration of a given...

Learning objectives: Define, compute, and interpret the effective duration of a fixed income security given a change in yield and the resulting change in price. Compare and contrast DV01 and effective duration as measures of price sensitivity. Define, compute, and interpret the convexity of a...

Hi everyone, It's my first time posting but I've been reading the forums since I enrolled for the FRM part I more than a year ago and I wanted, before anything else, to thank you all, particularly David, for all the help I've gotten from such a knowledgeable and supportive community while...

Please, could you anyone explain me why the convexity increase at an increasing rate as duration increase. I think that the duration should be decrease at an increasing rate. Best regards

Hi All Could someone please explain why we divide convexity by periodicity squared to get annualized convexity. Thanks for the help.

Hello, I am trying to work on convexity and duration exercises but every time I need the V+ and V- of a bond for my formulas and can't find how to calculate them. Here's an example: I have a bond 9% Coupon. 20 year 6% YTM At 134.622 And a 20bp change in Yield. The convexity formula asks me...

Learning objectives: Calculate the change in a bond’s price given its duration, its convexity, and a change in interest rates. Compare and contrast the major theories of the term structure of interest rates Questions: 715.1. Consider the following continuously compounded zero (spot) rate curve...

Learning objectives: Calculate the duration, modified duration, and dollar duration of a bond. Evaluate the limitations of duration and explain how convexity addresses some of them. Questions 714.1. A very risky two-year bond with a face value of $100.00 pays a semi-annual coupon of 18.0% and...

Just thought I would like to share how you actually loose money regardless of the direction of the underlying when you are short gamma (or convexity) by shorting an option. ∆a be the underlying shares (or bonds whatever) we know convexity as ∆a+ 1/2 Г a^2 Thus, our net position will be ∆a -...