- CFA Exams
- CFA Level I Exam
- Study Session 13. Fixed Income (2)
- Reading 34. Valuation and Analysis of Bonds with Embedded Options
- Subject 6. Effective Convexity
CFA Practice Question
Callable bond prices at yields greater than the coupon rate exhibit:
A. negative convexity.
B. positive convexity.
C. negative concavity.
User Contributed Comments 6
| User | Comment |
|---|---|
| kalps | It is only when yields fall does the price not change as expected becos of call option - i.e. price increase is surpressed by option |
| nchilds | Yields are rising in this example |
| Rotigga | Just remember the graph and questions like these will be easy. |
| cong | Effective convexity can be negative. Modified convexity can't. |
| johntan1979 | That's deep, cong :) |
| albert9 | doesn't positive convexity = negative concavity? |