Question: Explain in detail the difference between Macaulay's duration and modified duration. What is convexity and why is it generally considered a desirable trait? Provide example

  1. Explain in detail the difference between Macaulay's duration and modified duration.
  2. What is convexity and why is it generally considered a desirable trait? Provide example with clear explanation
  3. What are the sources of potential profit and loss for an active bond manager?

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