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)
“... if, as women, we accept a philosophy of history that asserts that women are by definition assimilated into the male universal, that we can understand our past through a male lens—if we are unaware that women even have a history—we live our lives similarly unanchored, drifting in response to a veering wind of myth and bias.”
—Adrienne Rich (b. 1929)