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- 2012-9-12
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End of Chapter Ques 8 for Reading 66 claims that a bond can have negative convexity because it is "high coupon".
That doesn't seem right. However large the coupons may be, a option-free bond is just a bunch of Zero Coupons, each of which has positive convexity, thus resulting in positive convexity for the entire bond.
Bonds with embedded options like callable bonds may have negative convexity, but not option-free bonds.
Seems like the textbook is wrong, any opinions?
NC |
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发表于 2011-7-11 18:36
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