Bond Duration and Convexity Explained
Duration measures a bond’s price move per 1% yield change; convexity is the correction that matters when rates move a lot. The math, with examples.
Duration measures a bond’s price move per 1% yield change; convexity is the correction that matters when rates move a lot. The math, with examples.
Duration is a tangent line; convexity is the curvature. Here is the formula, a worked 10-year Treasury example, and why MBS has negative convexity.