Convexity

A bond's second-order rate sensitivity: accounts for the curvature in the price-yield relationship that duration alone (which assumes a linear relationship) misses.

Positive convexity: bond prices fall less when rates rise sharply, and rise more when they fall. Most regular bonds. Negative convexity: bond prices fall more when rates rise. Characterizes mortgage-backed securities, where prepayment risk worsens with rate moves.