Fixed Income Basics: Yield, Duration, and Convexity
We are leaving the world of options for a bit and entering the world of fixed income. This is the world of bonds, interest rates, and cashflows. Chapter 13 of Wilmott’s book is a self-contained introduction that does not require anything from earlier chapters. If you have ever wondered what a yield curve is or why bond traders care about something called “duration,” this is the post for you.