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Convexity Adjustment to the precentage price change

June 11, 2012
  • Convexity Adjustment = C * (∆y)^2 * 100
  • ∆y = the change in yield for which the percentage price change is sought
  • C = Vincrease + Vdecrease – 2Vcurrent / (2 * Vcurrent * (∆y)^2)

The ∆y in the second formula is slightly different strictly speaking. Convexity is a popular question topic, duration even more so,  try to understand it don’t just try to memorize the above formulas.


From → Asset Valuation

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