- CFA Exams
- CFA Level I Exam
- Study Session 12. Fixed Income (1)
- Reading 32. The Term Structure and Interest Rate Dynamics
- Subject 7. Yield Curve Factor Models
CFA Practice Question
Which of the following interpretations of duration and convexity is true?
II. Portfolio convexity is the weighted average of the individual bonds' convexities.
III. Portfolio convexity will only provide meaningful figures for changes in portfolio value, if there is a parallel shift in the yield curve.
I. Effective duration does not take into account the bond price's sensitivity to credit risk.
II. Portfolio convexity is the weighted average of the individual bonds' convexities.
III. Portfolio convexity will only provide meaningful figures for changes in portfolio value, if there is a parallel shift in the yield curve.
A. I and II
B. I and III
C. I, II and III
User Contributed Comments 3
| User | Comment |
|---|---|
| 9630 | same degree of interest rate risk if yield curve shift is parallel. |
| prtfw | why does it have to be a parallel shift for duration and convexity to work? is there any measure that works for non-parallel shifts? |
| Paulvw | prtfw: Key rate duration. |