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Basic Question 10 of 24
Callable bonds exhibit ______ convexity.
B. negative
C. both A and B
A. positive
B. negative
C. both A and B
User Contributed Comments 2
| User | Comment |
|---|---|
| janglejuic | positive then negative as you see from the graph in LOS |
| GBolt93 | pretty sure you have that backwards. Low yields have negative convexity because you would call the bond and refinance at a lower rate. high yields have positive convexity like a non-callable bond because the call option is worthless since you wouldn't want to refinance the debt at a higher rate. |
I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach
Learning Outcome Statements
explain why effective duration and effective convexity are the most appropriate measures of interest rate risk for bonds with embedded options
calculate the percentage price change of a bond for a specified change in benchmark yield, given the bond's effective duration and convexity
CFA® 2025 Level I Curriculum, Volume 4, Module 13.