Convexity adjustment formula

Tags: bonds pricing and analysis

Description of the Convexity adjustment formula

Formula for the calculation of a bond's convexity adjustment used to measure the change of a bond's price for a given change in its yield.

Formula

C A = C V \times 100 \times {(Δ y)}^{2}

Symbols

C V

Bond's convexity

Δ y

Change of yield

Additional information related to this formula

Related definitions from the glossary of financial terms

Bond • Clean price • Convexity • Yield

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How to Calculate the Price of a Coupon Bond: A Comprehensive Guide • Measuring Interest Rate Risk and Credit Risk for Bonds: Exploring Duration, Convexity, and PVBP

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