Convexity is a measure of how much a bond's price-yield curve deviates from the linear approximation of that curve.

Question

Quizplus · Accepted Answer

Convexity refers to the degree of curvature in the price-yield relationship of a bond. It measures how much the bond's price will change in response to changes in yield, and it represents the second derivative of the bond's price-yield curve. Therefore, convexity is a measure of the deviation from the linear approximation of the curve, making option A true.

Convexity Is a Measure of How Much a Bond's Price-Yield