Lehman Brothers: Can Convexity Be Exploited?
Excerpts: Lehman Brothers: Can Convexity Be Exploited? Many investors believe that convexity is a desirable portfolio attribute. Whether the market moves up or down, high-convexity portfolios will always outperform low-convexity portfolios of equal duration and yield. It can be demonstrated mathematically that if we simply model the possible changes to the yield curve as the […]