convexity | R Documentation |
Calculates the convexity of a bond.
This function is normally used in combination with total_return() to compute bond total returns.
convexity(yields, maturity, format_out = "xts")
yields |
a series of yields |
maturity |
constant bond maturity in years |
format_out |
xts or tibble |
This function is normally used in combination with total_return() to compute bond total returns.
The convexity is the interest rate sensitivity of the modified duration.
convexity = C_1 - C_2
where
C_1 = \frac{2}{y_t^2} (1-{z_t}^{-2M})
C_2 = \frac{2M}{y_t}{z_t}^{-2M-1}
z_t = 1+\frac{y_t}{2}
M
is the maturity in years (e.g. 10), y_t
is the yield at time t
.
The convexity or a series of convexities of a bond with the given yield and maturity
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