PT  - JOURNAL ARTICLE
AU  - Joseph Choongseok Kang
AU  - Andrew H. Chen
TI  - Evidence on Theta and Convexity in Treasury Returns
AID  - 10.3905/jfi.2002.319317
DP  - 2002 Jun 30
TA  - The Journal of Fixed Income
PG  - 41--50
VI  - 12
IP  - 1
4099  - https://pm-research.com/content/12/1/41.short
4100  - https://pm-research.com/content/12/1/41.full
AB  - There is research on option-free U.S. Treasuries indicating that even when yield changes are quite substantial, a time passage, not convexity, effect explains a non-negligible portion of Treasury returns. The authors use data on option-free Treasuries of the United States and ten other major countries over 1975–2000 to examine whether this surprising finding holds for different Treasury markets, interest rate environments, and diverse maturity sectors. The main finding is that in all major international Treasury markets, the theta effect is indeed much more important than the convexity effect, even for a one-day period and for a yield change equivalent to two standard deviations.