What is negative convexity?
What will be an ideal response?
Negative convexity means that the price appreciation will be less than the price depreciation for a large change in yield of a given number of basis points. For a bond that is option-free and displays positive convexity, the price appreciation will be greater than the price depreciation for a large change in yield. It is important to note that a bond can still trade above its call price even if it is highly likely to be called.
You might also like to view...
Which of the following is a type of qualitative research?
A) phenomenological research B) descriptive research C) scientific research D) behavioral research
A "strategy" can be best described as a collection of techniques, practices, or methods you use when you are face to face with a customer
Indicate whether the statement is true or false
Federal contractors are entitled to _____ against state tort claims if the contractor can demonstrate that the contractor designed the product pursuant to federal guidelines and that it made the federal government aware of any known risks
Fill in the blanks with correct word
What action would the management take if it wants to gain more ownership control of the firm?
A. Issue more growth stocks B. Issue more common stock to the public C. Repay portions of its loans D. Repurchase shares of common stock E. Pay cumulative dividends to preferred stocks