L2 - Convexity

[AR]

Another formula question:
Given the two convexity formulas in the L2 curriculum, which one do most of you think we should go with? I know that consistency is what matters when you use the convexity calc in the percentage change formula, but I just wanted to know what y'all thought.

 

[help]

People on wall street should not be using y'all. Convexity is simply the second derivative of the change in price with respect to the change in interest rates. If you know calculus, the formula is mickey mouse.

 

[Ramani]

Convexity is the second derivative of the change in price with respect to the change in interest rates DIVIDED BY THE PRICE OF THE BOND.

 

[Travis]

Yeah, yeah, and duration is the first derivative. Forgive me if I haven't taken a calc class since I was 18. The one I'd use is (B+ + B- + 2B)/R^2 x B -- they will ask you the difference between the modified convexity and effective convexity.