A measure of the sensitivity of duration to changes in yield levels. Convexity is a measure of the stability or instability of the measured duration over a range of yields. If convexity is low, that is, if the price/yield relationship is close to a straight line, duration is stable. If convexity is high, duration is unstable. The greater an instrument's convexity, the less accurate duration will be.
See duration, effective duration, Macaulay duration and modified duration. American Banker Glossary
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Property that a curve is above a straight line connecting two end points. If the curve falls below the straight line, it is called concave. Bloomberg Financial Dictionary
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Like duration, convexity is a measure of the price sensitivity of a bond. It measures the change in modified duration for a change in yield.
► See also Duration.
Financial and business terms. 2012.