Duration is often applied to relate bond price changes to changes in the yield to maturity (or key interest rates). As the relationship between bond price and yield is non-linear, convexity characteristics can be used to improve the linear first order approximation. In this paper, we show that...

In fixed income analysis, duration plays a central role as a proxy for interestrate risk exposure. Althoughthis role relies on the interpretation of duration as (minus) theyield elasticity of the bond price, duration ismeasured as a bond's present value weighted average time to maturity...