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Basic Question 12 of 17
The convexity adjustment to percentage price change for a bond that has a duration of 4.5 and a convexity of 13.25, when the interest shock is +200 basis points, would be closest to ______.
B. 0.53
C. 0.0265
A. -8.47
B. 0.53
C. 0.0265
User Contributed Comments 5
| User | Comment |
|---|---|
| cong | 1/2 x ann convexity x (yield change)^2 |
| endurance | thanks cong |
| tomalot | Why not "4.5*(.02) x 100+...."? |
| Teeto | why sometimes there is 1/2 and sometimes not? |
| CFAJ | 4.5 is the modified duration and we are looking for convexity adjustment so need to use the ann.convexity |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
calculate and interpret convexity and describe the convexity adjustment
calculate the percentage price change of a bond for a specified change in yield, given the bond's duration and convexity
CFA® 2025 Level I Curriculum, Volume 4, Module 12.