Yield-Based Bond Convexity and Portfolio PropertiesLocked: included in All Access

Why duration alone misjudges large yield moves, how convexity measures the curvature of the price-yield relationship, how to combine duration and convexity into a sharper price-change estimate (in percent and in currency), and how to measure and interpret the duration and convexity of a bond portfolio.

1. 1. Convexity: measuring the curveDuration draws a straight line through a curved price-yield relationship; convexity measures how much the curve bends away from that line.Locked: included in All Access14 min
2. 2. What drives convexity, and why investors value itLong maturity, low coupon, low yield and widely spread cash flows all raise convexity, and more convexity means better price behaviour when yields move a lot.Locked: included in All Access12 min
3. 3. Estimating price changes with duration and convexityAdd the convexity adjustment, half of convexity times the squared yield change, to the duration estimate, and the price-change estimate moves much closer to the truth.Video · 6 minLocked: included in All Access13 min
4. 4. Money convexity: the adjustment in currencyMoney convexity is annual convexity times the position's full value, and it turns the convexity adjustment into currency units next to money duration.Locked: included in All Access11 min
5. 5. Portfolio duration and convexityIn practice, a portfolio's duration and convexity are the market-value-weighted averages of its bonds' measures: easy to use, but valid only for parallel yield-curve shifts.Video · 7 minLocked: included in All Access13 min