Convexity and V+ / V-


New Member

I am trying to work on convexity and duration exercises but every time I need the V+ and V- of a bond for my formulas and can't find how to calculate them.
Here's an example:
I have a bond 9% Coupon.
20 year
6% YTM
At 134.622
And a 20bp change in Yield. The convexity formula asks me for V+ and V- , how can I find it please?

Thank you

David Harper CFA FRM

David Harper CFA FRM
Staff member
Hi @Doufraki The key is to only change your yield key [I/Y] after the first price calculation because the other TVM inputs don't change; you can re-price the bond each time you change one (or more inputs). So, in this case,
  • Initial price is given by: 40 [N], 3 [I/Y], 4.5 [PMT], 100 [FV] and [CPT] [PV] returns -134.6722. Then just shock the yield, this is semi-annual periods such that 6.20%/2 = 3.10% and 5.80%/2 = 2.9% so that you only need to change [I/Y] and re-compute:
  • 3.1 [I/Y] and [CPT] PV] returns -131.8439
  • 2.9 [I/Y] and [CPT] PV] returns -137.5888. I hope that helps!