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Convex1. Said of a curve that bulges toward some reference point, usually the horizontal axis or the origin of a diagram. More formally, a curve is convex from below (or convex to something below it) if all straight lines connecting points on it lie on or above it. Contrasts with concave. 2. Said of a set that contains all straight line segments joining points within it.ConvexCurved, as in the shape of the outside of a circle. Usually referring to the price/required yield relationship for option-free bonds.Convex Similar MatchesNonconvexityNonconvexityThe property of an economic model or system that sets representing technology, preferences, or constraints are not mathematically convex. Because convexity is needed for proof that competitive equilibrium is efficient and well-behaved, nonconvexities may imply market failures. Positive convexityPositive convexityA property of option-free bonds that the price appreciation for a large downward change in interest rates will be greater (in absolute terms) than the price depreciation for the same downward change in interest rates. Negative convexityNegative convexityA bond characteristic such that the price appreciation will be less than the price depreciation for a large change in yield of a given number of basis points. For example, a fixed-rate mortgage may lose value as rates go down because of prepayments. ConvexityConvexityProperty that a curve is above a straight line connecting two end points. If the curve falls below the straight line, it is called concave. |
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