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6. Bond Convexity

h. calculate and interpret approximate convexity and distinguish between approximate and effective convexity;

## i. estimate the percentage price change of a bond for a specified change in yield, given the bond’s approximate duration and convexity;

When is a bond convexity measure typically used? To improve the estimate provided by duration, particularly for a large change in yield, a convexity measure can be used.

What is the formula for convexity measure? \(ApproxCon = \frac{PV_\_ + PV_+ - 2 * PV_0}{(\Delta Yield)^2 * PV_0}\)