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Convexity of a bond formula

Description of the Convexity of a bond formula

Formula for the calculation of a bond's convexity

Formula

\[ CV = \frac{P' + P'' - 2P}{2P\left ( \Delta y \right )^{2}} \ \]

Symbols

\(ΔP′\ \)       
Change of the price if yield increases by one basis point
\(ΔP″\ \)       
Change of the price if yield decreases by one basis point
\(Δy\ \)       
Change of yield
\(P\ \)       
Bond price