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What Is Convexity? How Does Convexity Affect Duration-Based Predicted Price

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What is convexity? How does convexity affect duration-based predicted price changes for interest rates changes?


Definitions:

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares.

Par Value

The nominal or face value of a bond or stock as stated by the issuing company, not necessarily reflecting its market value.

Earnings Per Share

Earnings Per Share (EPS) measures the portion of a company's profit allocated to each outstanding share, indicating a company’s financial performance.

Owners' Equity

The residual interest in the assets of a company after deducting its liabilities, representing the ownership stake held by shareholders.

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