convexity

convexity
A measure of the sensitivity of duration to changes in yield levels. Convexity is a measure of the stability or instability of the measured duration over a range of yields. If convexity is low, that is, if the price/yield relationship is close to a straight line, duration is stable. If convexity is high, duration is unstable. The greater an instrument's convexity, the less accurate duration will be.
See duration, effective duration, Macaulay duration and modified duration. American Banker Glossary
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Property that a curve is above a straight line connecting two end points. If the curve falls below the straight line, it is called concave. Bloomberg Financial Dictionary

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   Like duration, convexity is a measure of the price sensitivity of a bond. It measures the change in modified duration for a change in yield.
   ► See also Duration.

Financial and business terms. 2012.

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  • Convexity — Con*vex i*ty, n.; pl. {Convexities}. [L. convexitas: cf. F. convexit[ e].] The state of being convex; the exterior surface of a convex body; roundness. [1913 Webster] A smooth, uniform convexity and rotundity of a globe. Bentley. [1913 Webster] …   The Collaborative International Dictionary of English

  • convexity — [kän vek′sə tē, kənvek′sə tē] n. [L convexitas] 1. the quality or condition of being convex 2. pl. convexities a convex surface, line, etc …   English World dictionary

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  • convexity — convex ► ADJECTIVE ▪ having an outline or surface that curves outwards like the exterior of a sphere. Compare with CONCAVE(Cf. ↑concavity). DERIVATIVES convexity noun convexly adverb. ORIGIN Latin convexus vaulted, arched …   English terms dictionary

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