- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 13. Curve-Based and Empirical Fixed-Income Risk Measures
- Subject 1. Curve-Based Interest Rate Risk Measures
CFA Practice Question
Callable bonds exhibit ______ convexity.
B. negative
C. both A and B
A. positive
B. negative
C. both A and B
Correct Answer: C
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. |