Bond Convexity Definition

Bond Convexity is a measure of the curvature inside the relationship between attachment prices and attachment yields that demonstrates how a duration of the bond changes as the interest rate modifications. Convexity is used being a risk-management tool, and helps to measure and manage the amount of market risk to which a collection of bonds is exposed. In finance, bond convexity is a measure of the actual non-linear relationship among price and yield duration of an bond to changes in interest levels, the second derivative of the buying price of the bond with respect to interest rates.