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...

Ibbotson's “Stocks, Bonds, Bills and Inflation” data set is widely used because it provides monthly US financial data series going back to as early as 1926. In this data set, the “default premium” is calculated as the difference between the total returns on long-term corporate bonds and...