The direction of duration and interest rate is opposite , that means if interest rate increase , the higher the duration, the more the drop in value , but how about the convexity , the larger the convexity , the more INCREASE in value if interest rate increase ? Am I correct ? Thanks !!
Yes positive convexity always has a positive effect on the price, so whether it’s a fall or rise in interest rates, if the convexity is positive the price will either rise more, or fall less due to that convexity.
If interest rates increase, lower the duration. For larger convexity (positive convexity), if rates increase the lesser the price falls.