Convexity of a bond formula

Tags: bonds pricing and analysis

Description of the Convexity of a bond formula

Formula for the calculation of a bond's convexity

Formula

C V = \frac{P^{'} + P^{″} - 2 P}{2 P {(Δ y)}^{2}}

Symbols

Δ P'

Change of the price if yield increases by one basis point

Δ P ″

Change of the price if yield decreases by one basis point

Δ y

Change of yield

P

Bond price

Additional information related to this formula

Related definitions from the glossary of financial terms

Bond • Clean price • Convexity • Yield

Related articles

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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Bond price calculator