Bond Convexity and Yield Changes - Quant Trader Interview Question
Difficulty: Hard
Category: Betting Games
Practice quant interview questions from top firms including Jane Street, Citadel, Two Sigma, DE Shaw, and other leading quantitative finance companies.
Topics: bond-convexity, yield-curve, fixed-income, trading-intuition
Problem Description
You are a bond trader evaluating two bonds with similar durations but different convexities. Bond A has higher convexity than Bond B. Assume both bonds are trading at par.
If yields across the curve fall by 100 basis points (1%), which bond will experience a larger price increase?
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