The Importance of Convexity

Harley: For many people, convexity is still a mystery. You should know what it means, but I think some people don't and perhaps are reluctant to ask. What is convexity? Well, it does seem when you put Xs and Zs into words or you use Greek letters that tend to be rather challenging and turn one head off. If a straight riskless one to one asset like a treasury yields 4%, a netletic best one is going to yield higher,. It has to because if they both yield four, you take the other bet. That's all it means. And thus comes this concept of OAS, option adjusted spread, which we try