What Is Convexity of a Bond? - TheStreet Definition

Dictionary of Financial Terms

Convexity describes the relationship between price and yield for a standard, noncallable bond.

Bond prices and yields move in opposite directions: A bond's yield rises when its price falls, and falls when its price rises.

When the relationship between price and yield is graphed, it produces a line that is curved, or convex, as this graph shows. For more detailed information on convexity, click here.

Definitions of Financial Terms