Convexity

devinarastogi84
Good Student
Posts: 22
Joined: Thu Apr 17, 2014 9:40 pm

Convexity

Postby devinarastogi84 » Fri Apr 18, 2014 4:42 am

What is the percentage change in price of a bond if there is decrease of 50 bps in yield, and the modified duration of the bond is 8.5 with convexity of 350?

What formula and logic will be used , Please explain in detial to solve the above question.

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

Convexity

Postby edupristine » Mon Apr 21, 2014 6:19 am

First calculate the price change with the duration effect . Then calculate the price change with the convexity effect . After that Add them up.

devinarastogi84
Good Student
Posts: 22
Joined: Thu Apr 17, 2014 9:40 pm

Postby devinarastogi84 » Sun Apr 27, 2014 4:15 pm

thanks alot


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