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Convexity of a Zero



Could you clarify the choice d. question 29.1 ?

29.1 Which of the following is NOT necessarily true about convexity?
a. Convexity is a function of the second derivative with respect to interest rate
b. For a vanilla bond, convexity is always positive
c. Convexity is the weighted average of maturity-squares of a bond
d. For a zero-coupon bond, convexity decreases as yield increases

If we agree the Convexity of a Zero is given by C = T(T+1/k) / (1+y/k)^2, C is decreasing as y increases.

The solutions refers to the case of Dollar convexity. Should we consider all kinds of convexity when the question asks for convexity (without mentioning "Dollar") ?



Hi Nicole, on the technical part the link you posted shows "(You have insufficient privileges to reply here.)"

Nicole Seaman

Director of FRM Operations
Staff member
Hello @Kaiser,

Thank you for pointing that out. I reset your forum permissions so you should have no issues accessing any part of the forum now. You may need to clear your cache and cookies before logging back into the forum. If this happens again, please let me know.

Thank you,