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Xerxes
The sensitivity of Convexity to a change in yield.
The “Convexity” of Modified Duration
The third derivative of a financial instrument’s value with respect to its yield.
Hedging so that Xerxes equals zero is one step beyond Convexity hedging, which is itself one step beyond matching durations of one’s investment and (short) hedge portfolio. In theory, such a hedge would require relatively little rebalancing.
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Naive diversification A strategy whereby an investor simply invests in a number of different assets and hopes that the variance of the expected return on the portfolio is lowered. Related: Markowitz diversification. Naked The opposite […]
Gamma The ratio of a change in the option delta to a small change in the price of the asset on which the option is written. Garmen-Kohlhagen option pricing model A widely used model for […]
Kamikaze Defense A kamikaze defense is a method for deterring a potential acquirer from purchasing a company. How it works: Kamikaze defense is named after the suicide attacks of Japanese pilots during World War II. […]
