Convexity and Exceptional Return
categories: RMA, Fixed Income, Asset Pricing and Valuation, Research Paper, KAHN Ronald N., LOCHOFF Roland, general
The argument that convexity can generate exceptional return assumes that the term structure always shifts in parallel. This article examines whether the deviation from the parallel shift assumption is sufficient to negate this conclusion. The analysis used in this article is return attribution analysis, a technique long used to analyze equity returns.