Which of the following statements are incorrect?
A) Convexity is a desirable effect to a portfolio manager because it is easy to measure and price.
B) All fixed-income assets exhibit convexity in their price-yield relationships.
C) The greater is convexity, the more insurance a portfolio manager has against interest rate increases and the greater potential gain from rate decreases.
D) The fact that the capital gain effect for rate decreases is greater than the capital loss effect for rate increases is caused by convexity in the yield-price relationship.

Question

Quizplus · Accepted Answer

Convexity can be difficult to measure and price accurately, especially for complex securities or portfolios.

Answer: B
 Some fixed-income assets, such as zero-coupon bonds, do not exhibit convexity. Convexity is more commonly seen in bonds with coupon payments.

Answer: None of the statements are incorrect.

Which of the Following Statements Are Incorrect