Calculating Convexity

What are people’s thoughts? Do we need to know the calculation for convexity, or just how to arrive convexity adjusted duration, assuming convexity is given to us. I ask, because schweser doesn’t cover the convexity calculation at all, nor have I seen it in any question or test. They always just given the convexity.

Don’t think that we need to know how to get there. I remember when I went to a class, the tutor said that we would always be given the convexity number.

Good to hear. Brain doesn’t want another calculation shoved in there.

I think that the calculation involves 2nd order deriviatives or some nonsense. I think that it was in the exam last year, but the CFA saw sense and take it out this year… thankfully!!

It was definitely on the exam last year. The first order approximation for convexity is quite simple to remember. (V- + V+ -2V_0)/(2V_0 * (Change in yield in decimal)^2).

yeah convexity calculation is very much like duration. remember for numerator instead of doing a higher price - lower price, you are doing higher price + lower price - twice the original price. (an adjustment) and the denominator you are simply squaring the yield in bps = 2 x y^2 x price

You can find the formula in stalla book.