Mathematical Definition
If the flat floating interest rate is r and the bond price is B, then the convexity C is defined as
Another way of expressing C is in terms of the modified duration D:
Therefore
leaving
Where D is a Modified Duration
Read more about this topic: Bond Convexity
Famous quotes containing the words mathematical and/or definition:
“What he loved so much in the plant morphological structure of the tree was that given a fixed mathematical basis, the final evolution was so incalculable.”
—D.H. (David Herbert)
“Perhaps the best definition of progress would be the continuing efforts of men and women to narrow the gap between the convenience of the powers that be and the unwritten charter.”
—Nadine Gordimer (b. 1923)
Related Phrases
Related Words