How To Calculate Convexity Of A Zero Coupon Bond

Introduction & Importance

Zero coupon bonds are a type of debt obligation that does not pay interest. Instead, they are sold at a discount to their face value and redeemed at maturity for the full face value. Convexity is a measure of the curvature of the bond’s price-yield relationship…

For more information, see the U.S. Department of the Treasury’s guide to bonds and the Investopedia’s explanation of bond convexity.