Convexity is important in bond analysis because:

Name: Convexity is important in bond analysis because:
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Duration is a linear approximation of the price-yield relationship of a bond, which works best for small changes in yield. Convexity is important because it accounts for the curvature in the price-yield relationship that duration alone cannot capture, making it a more accurate measure for assessing bond price sensitivity to yield changes, especially for larger yield changes.

Convexity Is Important in Bond Analysis Because