"Where Everyone Has an MBA"
Tel: (612) 246-4616
Tel: (612) 246-4616
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.
CONTINGENCY PLAN is a plan that provides an outline of decisions and measures to be taken if defined circumstances, outside the control of the affected organization, should occur.
CLOSING ENTRY is a journal entry at the end of a period to transfer the net effect of revenue and expense items from the income statement to owners equity.
Enter a term, then click the entry you would like to view.