alleryStart learning →Which feature produces negative convexity in a bond?
AZero coupon design
BEmbedded options
CLong maturity only
DFloating coupon rate
Answer & Solution
Correct answer: B. Embedded options
Embedded options such as calls cap price gains when yields fall, creating negative convexity.
Keep practising Asset Allocation
Browse all Asset Allocation questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
In UK gilt market guides, modified duration is often called what?What does key rate duration capture that ordinary duration does not?Fisher-Weil duration discounts each cash flow at which rate?Effective duration is used for securities such as callable bonds because their what changeDuration alone becomes less accurate as the yield change does what?What improves a duration estimate when yields change by a large amount?What does DV01 express?A portfolio holds equal present values in bonds of duration 4 and 8. What is portfolio dur