Yield-Based Bond Convexity and Portfolio Properties
Free CFA Level I lesson in Fixed Income. 12 min read, ~1,754 words.
Convexity captures the curvature of the price-yield relationship that duration's straight tangent line misses, and it is always positive for option-free bonds. Full price change ≈ −ModDur × Δy + ½ × Convexity × (Δy)²; the duration term is signed while the convexity term is always positive. Approximate Convexity =...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- yield-based convexity portfolio properties
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