Convexity and Duration Effect

[keep_running]

When calculating the change in price based upon the change in yield, why do you have to include the duration and the effects of convexity?
Is it because convexity explains some of the change in the bond price that is not explained or accounted for by duration?

 

[S2000magician]

Absolutely correct.
Duration is a straight-line approximation to the percentage change in the bond price, which isn’t a linear function. Convexity adds the curvature.
I wrote an article on convexity that explains this, and has a nice colored graph illustrating it: http://financialexamhelp123.com/convexity/