A measure of the curvature in the relationship between bond prices and interest rates, capturing how duration changes as yields change. Positive convexity benefits bondholders by providing asymmetric price sensitivity to rate changes.
From Latin 'convexus' meaning 'arched' or 'curved outward.' The financial application emerged from advanced bond mathematics in the 1980s to describe the curved, rather than linear, relationship between bond prices and yields.
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