UK Accounting Glossary
Convexity is a measure of the curvature, or the degree of the curve, in the relationship between bond prices and bond yields. Convexity demonstrates how the duration of a bond changes as the interest rate changes.
It forms an arc of a circle of which the convexity turns slightly to the north; neither bay nor promontory breaks the regularity of its outline.
In all such cases, there is no component to plan convexity, any curvature being entirely orthogonal to the x-y plane.
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This glossary post was last updated: 30th September 2019.