Bridge over ocean
1 September 1992 Financial Analysts Journal Volume 48, Issue 5

The Role of Convexity in Equity Pricing

  1. Lewis D. Johnson

The degree of curvature of the price-yield curve helps to explain price changes for certain stocks in certain situations, consistent with the comparative statics of the model. This relationship is not merely proxying for corporate growth prospects. These results have important implications for portfolio managers trying to optimize immunization and convexity jointly.

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