The higher the convexity, the more dramatic the change in price given a move in interest rates. Whatever you call it, after a while, if you keep braking a car it stops. After a while, if your bond is experiencing negative convexity, it also slows down/loses value.

What does positive convexity mean?

A bond is said to have positive convexity if duration rises as the yield declines. A bond with positive convexity will have larger price increases due to a decline in yields than price declines due to an increase in yields.

Is negative convexity good?

Negative convexity exists when the price of a bond falls as well as interest rates, resulting in a concave yield curve. Assessing a bond’s convexity is a great way to measure and manage a portfolio’s exposure to market risk.