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"[W]e offer this brief paper as a fundamental, rather than a comprehensive, overview of the topic ... Duration ... captures only one aspect of the relationship between bond prices and interest... some bonds, such as callable bonds and mortgage-backed securities, have negative convexity at lower interest rate levels. ... "During the period from October31, 2007, through March 31, 2010, the duration of the GNMA portfolio— ... was significantly more volatile than that of the Treasury portfolio even though the initial durations were approximately the same. This difference in duration is due in part to the negative convexity of GNMA bonds rate changes."
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