Dollar convexity
Calculating the dollar convexity of a bond is an important first step in using convexity to predict bond prices. In this exercise, you are going to calculate the dollar convexity of a 10 year bond paying a 2% coupon, with a yield of 3% and face value of USD 100.
Recall that the formula for dollar convexity is given by:
\( Dollar \ Convexity = Convexity \times Bond \ Price \times 0.01^2\)
numpy_financial has already been imported for you as npf.
This exercise is part of the course
Bond Valuation and Analysis in Python
Exercise instructions
- Find the dollar convexity of a 10 year bond with a 2% annual coupon and 3% yield and print the result.
Hands-on interactive exercise
Have a go at this exercise by completing this sample code.
# Find price of a 10 year bond with 2% coupon and 3% yield, shift yields, and reprice
price = ____
price_up = ____
price_down = ____
# Calculate convexity of the bond
convexity = ____
# Calculate dollar convexity and print the result
dollar_convexity = ____
print("Dollar convexity: ", ____)