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Negative convexity occurs when the shape of a bond's yield curve is concave. Most mortgage bonds are negatively convex, and callable bonds usually exhibit negative convexity at lower yields.
About 50 years ago, Art Laffer drew a convex curve on a napkin to illustrate the power of tax cuts to two senior officials from the Ford administration named Donald Rumsfeld and Dick Cheney ...
About 50 years ago, Art Laffer drew a convex curve on a napkin to illustrate the power of tax cuts to two senior officials from the Ford administration named Donald Rumsfeld and Dick Cheney ...