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Convexity |
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Definition of ConvexityConvexityA measure of the rate of change in duration; measured in time.
Related Terms:Effective convexityThe convexity of a bond calculated with cash flows that change with yields. Negative convexityA bond characteristic such that the price appreciation will be less than the price Positive convexity property of option-free bonds whereby the price appreciation for a large upward change Optimization approach to indexingAn approach to indexing which seeks to Optimize some objective, such Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit CommitteesA committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial Effective annual interest rateAn annual measure of the time value of money that fully reflects the effects of effective annual interest rateInterest rate that is annualized using compound interest. Effective annual yieldAnnualized interest rate on a security computed using compound interest techniques. Effective Annual YieldAnnualized rate of return on a security computed using compound Effective call priceThe strike price in an optional redemption provision plus the accrued interest to the Effective dateIn an interest rate swap, the date the swap begins accruing interest. Effective durationThe duration calculated using the approximate duration formula for a bond with an Effective Exchange RateThe weighted average of several exchange rates, where the weights are determined by the extent of our trade done with each country. Effective Interest RateThe rate of interest actually earned on an investment. It is Effective margin (EM)Used with SAT performance measures, the amount equaling the net earned spread, or Effective rateA measure of the time value of money that fully reflects the effects of compounding. Effective spreadThe gross underwriting spread adjusted for the impact of the announcement of the common Effective Tax RateThe total tax provision divided by pretax book income from continuing effectivenessa measure of how well an organization’s goals Negative amortizationA loan repayment schedule in which the outstanding principal balance of the loan Negative carryRelated: net financing cost negative cash flowThe cash flow from the operating activities of a business Negative covenantA bond covenant that limits or prohibits altogether certain actions unless the bondholders agree. Negative durationA situation in which the price of the MBS moves in the same direction as interest rates. Negative goodwillA term used to describe a situation in which a business combination Negative Loan CovenantsLoan covenants designed to limit a corporate borrower's behavior Negative pledge clauseA bond covenant that requires the borrower to grant lenders a lien equivalent to any Panel on Audit EffectivenessA special committee of the Public Oversight Board that was created Policy-Ineffectiveness PropositionTheory that anticipated policy has no effect on output. Magic of diversificationThe effective reduction of risk (variance) of a portfolio, achieved without reduction
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