Convexity adjustment (for the @CFA Level 1 exam)

Convexity adjustment (for the @CFA Level 1 exam) explores the computation of the predicted change in bond price due to the combined effects of duration and convexity.

[@ava75782]

Extremely well explained and I understood it completely. Thanks a lot.

[@Vectron_Of_Cybertronica]

Thanks a lot for the simple yet clear explanation!!

[@letmeexplaincfa]

You are very welcome :)

[@Cookie-3473]

Thank you so much sir !

[@hwuntsu4425]

Love the presentation and explanation, I subbed

[@letmeexplaincfa]

Thanks 🙏

[@christopherbarrett9900]

Thank you! Clear as usual :)

[@letmeexplaincfa]

You’re welcome!

[@Munger24]

Thank you for this !

[@letmeexplaincfa]

You’re very welcome👍

[@fadiaodeh8574]

You’re amazing 👌🏼

[@letmeexplaincfa]

Thank you!

[@kaiwang2924]

So well explained.

[@letmeexplaincfa]

Thank you so much!

[@MrAKIL0003]

Thank you for the great explanation

[@letmeexplaincfa]

You are very welcome!

[@ek6356]

Great work

[@letmeexplaincfa]

🙏

[@vitaliification]

Thank you for your amazing work! Please correct me if I'm wrong - the convexity adjustment could also be negative for a callable bond, right?

[@letmeexplaincfa]

Thank you! Yes, in the case of a callable bond, when interest rates become low enough, the curve becomes concave and that makes the convexity adjustment negative.

[@growlife4779]

Why when convexity is 0.25 do we have to convert it to 25. How did it get converted to 25?This is for credit risk section regarding price change

[@letmeexplaincfa]

25 basis points is the change in yield, giving 0.0025 expressed in decimal format. I don't thing I made any conversions to the convexity measure.

[@growlife4779]

@@letmeexplaincfa oh I was asking out of desperation a general question on cfa content - I really do not get why convexity gets converted from 0.25 to 25 when you calculate approximate price change percentage. Any help to let me explain would be greatly appreciated