[Verse 1] Picture bonds as rubber bands that stretch and bend with rates When yields climb up the mountain, prices tumble down the gates But here's the twist that matters most, the line ain't razor straight It curves just like a crescent moon, and that's convexity's trait [Chorus] Convex curves protect your wealth, the smile upon the chart Duration tells you half the tale, but misses the best part When rates swing wild in either way, convexity's your friend Positive curve, upward smile, profits on both ends [Verse 2] Duration says "move ten percent" but that's a linear guess The actual price moves differently, convexity's the test Short-term bonds stay fairly flat, long bonds curve like a bow Zero coupons bend the most, that's what you need to know [Chorus] Convex curves protect your wealth, the smile upon the chart Duration tells you half the tale, but misses the best part When rates swing wild in either way, convexity's your friend Positive curve, upward smile, profits on both ends [Bridge] Negative convex exists too, mortgage bonds can frown When rates drop low, refinance grows, curves flip upside down But most vanilla bonds you'll meet wear smiles proud and true The greater curve, the better hedge when volatility breaks through [Verse 3] Portfolio managers prize this gift, it's asymmetric gain When rates rise fast, you lose less cash, when rates fall, greater rain Duration plus convexity gives estimates more sound The second derivative matters when big moves come around [Chorus] Convex curves protect your wealth, the smile upon the chart Duration tells you half the tale, but misses the best part When rates swing wild in either way, convexity's your friend Positive curve, upward smile, profits on both ends [Outro] Remember price-yield's not a line, it bends like archer's bow Convexity measures that sweet curve, now you're in the know
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