Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Asume the convexity is scaled by the bond price, i.e. A par bond price is B=100$. Interest rate increase by 1% makes the price B(+1%)
Asume the convexity is scaled by the bond price, i.e.
A par bond price is B=100$.
Interest rate increase by 1% makes the price B(+1%) = 97$.
Interest rate decrease by 1% makes the price B(-1%) = 101$.
What is the convexity of a bond?
Use the decimals for the rate, 0.01 for 1%.
What is the convexity of a bond? Use the decimals for the rate, 0.01 for 1%.
Cvx= 1 dB a2B(r) B(r) ar
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started