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Home > QFINANCE Dictionary > Definition of convexity

Definition of

convexity

Economics

relationship of values the convex shape of a curve. The theory is that if points in a set are connected and the line between any two points is included in the set, then the set is convex. In economics, this corresponds to diminishing marginal utility. In finance it can represent a convex curve in the price yield relationship of a bond or any non-linear price function, for example, that of an option.

Definitions of ’convexity’ and meaning of ’convexity’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’convexity’ and other financial terms with our online QFINANCE Financial Dictionary.

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