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Comparing the convexity of two bonds directly

You can also investigate the influence of factors on bond convexity by pricing-up two bonds that vary only in this factor and then calculating the convexity of each bond directly.

In this exercise, you will find the convexity of two bonds; both will be 5 year bonds with a yield of 3% and face value of USD 100, but the first bond will pay a 1% coupon and the second bond will pay a 10% coupon.

numpy_financial has already been imported for you as npf.

This exercise is part of the course

Bond Valuation and Analysis in Python

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Hands-on interactive exercise

Have a go at this exercise by completing this sample code.

# Find the price of a 5 year bond with 3% yield and 1% coupon
price_1 = ____

# Shift yields up and down 1% and reprice
price_up_1 = ____
price_down_1 = ____

# Find convexity of the bond and print the result
convexity_1 = ____
print("Low Coupon Bond Convexity: ", ____)
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