The term convexity,
A) Quantifies the relationship between price risk and yield
B) Measures the rate of change of price elasticity with respect to yield
C) Measures how the investor's risk diminishes as interest rates rise
D) All of the above
E) None of the above

Question

Quizplus · Accepted Answer

Convexity quantifies the relationship between bond price and yield, measures the rate of change of duration (which is related to price elasticity) with respect to yield, and also reflects how price sensitivity changes with yield changes, indirectly affecting investor's risk as interest rates move.

The Term Convexity