Any summary of what we need to know about convexity of call-put options / callabl-putable bonds?
(positive-negative) etc
Appreciated
callable bonds have negative convexity, and due to the negative value of the embedded call option, they will not gain in value as fast as non-callable bonds when interest rates fall, but also will not drop in value as fast as non-callable bonds when interest rates rise.
the opposite is true for putable bonds (positive convexity etc. etc.)