Convexity adjustment (for the @CFA Level 1 exam) explores the computation of the predicted change in bond price due to the combined effects of duration and convexity.
Thank you! Yes, in the case of a callable bond, when interest rates become low enough, the curve becomes concave and that makes the convexity adjustment negative.
@@letmeexplaincfa oh I was asking out of desperation a general question on cfa content - I really do not get why convexity gets converted from 0.25 to 25 when you calculate approximate price change percentage. Any help to let me explain would be greatly appreciated
Extremely well explained and I understood it completely. Thanks a lot.
Thanks a lot for the simple yet clear explanation!!
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Thank you! Clear as usual :)
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So well explained.
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Thank you for the great explanation
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Thank you for your amazing work! Please correct me if I'm wrong - the convexity adjustment could also be negative for a callable bond, right?
Thank you! Yes, in the case of a callable bond, when interest rates become low enough, the curve becomes concave and that makes the convexity adjustment negative.
Why when convexity is 0.25 do we have to convert it to 25. How did it get converted to 25?This is for credit risk section regarding price change
25 basis points is the change in yield, giving 0.0025 expressed in decimal format. I don't thing I made any conversions to the convexity measure.
@@letmeexplaincfa oh I was asking out of desperation a general question on cfa content - I really do not get why convexity gets converted from 0.25 to 25 when you calculate approximate price change percentage. Any help to let me explain would be greatly appreciated
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