Convexity
Convexity measures curvature in the bond price-yield relationship and refines duration-based rate-risk estimates.
Fixed-income terms for convexity, negative convexity, and yield-curve risk.
Convexity and yield curve risk terms describe how bond price sensitivity changes as yields move and as different parts of the curve shift differently.
Use this branch when duration alone is not enough to explain price behavior.
| Term | What it clarifies |
|---|---|
| Convexity | How duration changes as yields move. |
| Negative Convexity | Price behavior often associated with callable or prepayable bonds. |
| Yield Curve Risk | Risk that different maturity points on the curve move differently. |
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Convexity measures curvature in the bond price-yield relationship and refines duration-based rate-risk estimates.
Negative convexity is unfavorable bond price-yield curvature where upside is constrained as yields fall, often because calls or prepayments become more likely.
Yield curve risk is fixed-income risk from nonparallel changes in the level, slope, or shape of the yield curve.