Where in part 2 do we need to be more familiar with convexity? This is admittedly a weak point for me (I don't know why) and I'd like to drill down into it further, if necessary.
Thanks,
Ryan
Thanks,
Ryan
Convexity and Part 2
- Thread starter Ryan S
- Start date
Hi
It important in price yield curve of fixed incime security that is convexity measures how much curved is the price yild curve the more curved the more the convexity,its positive for plain vanila bond but negative for embedded option bond as mbs at low yields.
I think convexity is also important in context of fixed income section that is in valuation of fixed income ,convexity meaures volatility effect on price,the jensen's inequality justifies volatility effect/convexity. Convexity in a way measures the volatility effect on price of fixed income product(option/security).
Convexity also appears in credit risk of securitized tranches,the relation b/w losses and default rate for senior tranche is positively convexed and for equity tranche its negative.
Thanks
It important in price yield curve of fixed incime security that is convexity measures how much curved is the price yild curve the more curved the more the convexity,its positive for plain vanila bond but negative for embedded option bond as mbs at low yields.
I think convexity is also important in context of fixed income section that is in valuation of fixed income ,convexity meaures volatility effect on price,the jensen's inequality justifies volatility effect/convexity. Convexity in a way measures the volatility effect on price of fixed income product(option/security).
Convexity also appears in credit risk of securitized tranches,the relation b/w losses and default rate for senior tranche is positively convexed and for equity tranche its negative.
Thanks
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