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What does convexity capture that duration does not?

  1. A The curvature of the price-yield relationship for larger yield changes
  2. B Credit risk
  3. C Reinvestment risk
  4. D Liquidity risk
Answer

The curvature of the price-yield relationship for larger yield changes

Positive convexity means prices rise more when yields fall than they fall when yields rise by the same amount.

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