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BOND CONVEXITY Please show the steps on how to derive equation 1 to get equation 2. / 1 d'p C== Convexity P dy? (1) Show

BOND CONVEXITY

Please show the steps on how to derive equation 1 to get equation 2.

/image text in transcribed

1 d'p C== Convexity P dy? (1) Show the steps on how to derive formula 1 to get formula 2 Convexity: Px (1+ y)? 4 t=1 P = Bond price. y = Yield to maturity in decimal form. T= Maturity in years. CF;=Cash flow at time t. Convexity Adjustment = Convexity x 100 x (Ay)2

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