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Tel: (612) 246-4616
ADVISING BANK is a bank in the exporters country handling a letter of credit.
CONVEXITY is the price change that occurs for a bond not accounted for or predicted by modified dU1"ation. Convexity explains why price change estimates using modified duration increase in error as the yield changes, generally by more than 100 basis points. Bonds with positive (negative) convexity have increased (decreased) duration as interest rates fall (rise). Bonds with positive convexity, such as those with put options, have returns higher than those predicted by duration alone. Mortgage-backed securities and callable bonds generally have negative convexity, which means that the price increase predicted by duration for a steep rate decline is too high.
TIME DEPOSIT is a bank deposit that can be withdrawn only after a set period of time or with prior notice, e.g. a certificate of deposit (CD).
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