Negative convexity 


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Negative 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 fixedrate mortgage may lose value as rates go down because of prepayments.Negative convexity Similar MatchesPositive convexityPositive convexityA property of optionfree 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. NonconvexityNonconvexityThe 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 wellbehaved, nonconvexities may imply market failures. 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. 
