When calculating the impact of a downgrade on a bondholder’s returns, how do you know when to scale convexity - just assume to do so when it’s given in decimal form? Thanks in advance!
S2000…any input? Thanks!
Frankly, I think that having to scale convexity _ sometimes _ is stupid: they should give you the numbers using the same convention all of the time.
Ah, well.
If the convexity number is significantly different from the square of the duration number, then scale it (usually up by 100, I believe). Yuck!
Agreed - very stupid. Thanks for the pointer though!
You’re welcome.