# Tagged Questions

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0answers
59 views

### Why does a barbell portfolio have higher convexity than a bullet porfolio

I cannot quite understood absolutely why a barbell portfolio has higher convexity than a bullet porfolio. I can easily understand how the parallel line represents duration but I cannot see what ...
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### Model free estimation of convexity in Eurodollar IR Futures

Can someone please share some thoughts on how to estimate convexity for a given Eurodollar interest rate future contract, without assuming any underlying model for rates i.e. LMM, Hull-White etc. I ...
1answer
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### Why Is Bond Time Value Risk Not Considered in Bond Immunization?

I know bond portfolio immunization includes duration and (if the hedging period is longer) convexity matching. These are equivalent to taking the first and second partial derivatives of the bond ...
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### long fra and a short ed future with same fixing dates, is convexivity negative or positive?

If you are long a FRA (forward rate agreement) and short a ED　（Eurodollars) future with the same fixing dates, do you have positive convexity or negative convexity? Why? According to the following ...
3answers
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### Interest Rate Convexity - Fundamental Question

I have a very basic question around convexity adjustments in swap valuations. I am comfortable with the mathematical derivation of the convexity adjustment. My question relates to when and why a ...
0answers
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### Proving the convexity of put price [duplicate]

Prove that the price of the European put option is a convex function of the strike price in one-step binomial model. In other words, if $P_E(X)$ is the price of the European put option in one-step ...
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### Pricing function $P(S,t)$ is convex in $S$ for all $t$

I am now reading Alternative Characterization of American Put Options by Carr et all (available at http://www.math.nyu.edu/research/carrp/papers/pdf/amerput7.pdf). There is a theorem called 'Main ...
2answers
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### When would dedicated portfolios do better than 'immunized' portfolios?

We just learned about cash-matching through dedicated portfolios (using risk free bonds) in my class that concerned mathematical programming. However, in an aside one of the notes said: It should be ...
1answer
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### Convex risk measure and a coherent risk measure?

A coherent risk measure is: $\rho(\lambda X_1+(1-\lambda X_2))$ How can it be shown that everey convex risk measure is indeed a coherent risk measure? I assume that it is enough to show that a ...
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### Duration vs. Convexity Contradiction

A lower coupon bond exhibits higher duration, which means higher price volatility with changing YTM. A lower coupon bond also exhibits higher convexity. However, with higher convexity, bond prices ...
1answer
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### How to calculate $E^{T_N}(L(T_i, T_{i+1}))$?

suppose $L(T_i, T_{i+1})$ is the LIBOR rate between $T_i$ and $T_{i+1}$, and $T_N$ is some time later than $T_{i+1}$. $E^{T_N}$ is the $T_N$-forward measure. I tried to work this out using John Hull'...
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### Quick way to extrapolate call price as function of strike

Let's say I know the price of a call for two different values of strike. Is there a quick way to guess the price for another value of strike ? Actually, I know that C(100)=15 and C(90)=20 and I have ...
0answers
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### Pricing inflation lags

I've been looking into a short piece of maths I found on pricing inflation with payment delays, and was hoping someone could confirm whether my understanding was correct or if the maths isn't quite ...
0answers
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### Inflation/Rates Correlation

I've been looking into a short piece of maths a colleague has written on pricing inflation with payment delays, and was hoping someone could confirm whether my understanding is correct, or if my ...
2answers
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### How does this follow from the separating hyperplane theorem?

This is from Pliskas book in mathematical finance. I do not know what was best to write the question so I included the pages from the book. He has not written what form of the separating hyperplane ...
0answers
496 views

### Convexity of Portfolio Containing Eurodollar Future and Forward Rate Agreement

Assume an individual is a buyer, i.e., long, of one Forward Rate Agreement and a seller, i.e., short, of one Eurodollar Futures contract. Does the collective portfolio have positive or negative ...
1answer
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### What's the underlying idea of definition of constrained market in Skiadas' Asset Pricing Theory?

I'm self-studying Skiadas' Asset Pricing Theory, and find the definition of constrained market on page 21 confusing(you can find it here in the sample chapter). Deﬁnition 1.26. A constrained ...
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507 views

### Bond Convexity Treasuries Futures

I know long duration bonds, on a a single bond basis, exhibit convexity however do treasury futures prices and the 10 yr yield exhibit the same property? Below is a plot of continious ten year ...
5answers
9k views

### Convexity adjustment for a forward swap rate

I recently heard that for a forward swap rate (for example, the fixed rate of a swap that will start in one year and end in five years), I need to do a convexity adjustment in order to get the right ...
1answer
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### Do taking in account the CSA create convexity effects in your stripping?

When you strip your rate curves using CSA, what kind of convexity effects might appear as a result when computing the CSAed curve from one fixing to another ? For example if you are valuing an USD ...