Chapter 4
Some Comments on Yield, Duration, and Convexity
Introduction
This book is intended for somewhat experienced fixed income analysts, traders, and portfolio managers, so we assume the reader has more than a passing familiarity with the concepts of yield, duration, and convexity. However, we do come across some confusion concerning these concepts from time to time, so we’ll offer a few thoughts in this chapter, designed to help clarify potential misunderstandings.
Some Brief Comments on the Yield of a Coupon-Paying Bond
A bond that pays a coupon is simply a portfolio of zero-coupon bonds, and the price of the coupon bond is the sum of the prices of the zero-coupon bonds.
However, the yield of a coupon bond generally can’t be expressed as ...
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