What is convexity (bond)?Convexity

How much a bond's price curves against rates; duration is only a straight-line estimate, so the bigger the rate move, the bigger the convexity error and the less accurate a duration hedge.

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Hedging Strategies
Hedging Interest Rate Risk: Duration and DV01
Bond funds fear rate hikes most. Selling Treasury futures by DV01 brings the portfolio's rate sensitivity down, but don't size it by market value.

Related terms

duration
duration hedging
DV01 (basis point value)

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