Tag Info

New answers tagged


The change of the price $P(y)$ if the yield changes from $y$ to $y+\Delta y$ is $$ \frac{P(y+\Delta y) - P(y)}{P(y)} = - D \Delta y + \frac12 C \Delta y^2, $$ where $D$ is the duration and $C$ is convexity. For small $\Delta y$ the square is much smaller. Thus the duration component dominates.

Top 50 recent answers are included