In investment analysis, betavexity is a form of
convexity
Convex or convexity may refer to:
Science and technology
* Convex lens, in optics
Mathematics
* Convex set, containing the whole line segment that joins points
** Convex polygon, a polygon which encloses a convex set of points
** Convex polytope ...
that is specific to the
beta coefficient
In finance, the beta (β or market beta or beta coefficient) is a measure of how an individual asset moves (on average) when the overall stock market increases or decreases. Thus, beta is a useful measure of the contribution of an individual a ...
of a
long tailed investment (i.e. mortality risk). It is similar in nature to
bond convexity
In finance, bond convexity is a measure of the non-linear relationship of bond prices to changes in interest rates, the second derivative of the price of the bond with respect to interest rates ( duration is the first derivative). In general, the ...
or
gamma that are exhibited in financial products such as
bonds or
options but is specific to portfolios replicating indices of shorter maturities.
Investment horizon
Certain investors such as insurance companies have longer-term investment horizons than hedge funds, which allow for investments in assets that have longer maturities. As a result, these investors can invest in assets that have an inherent return component linked to the dynamic of the term of the investment.
References
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Convex geometry
Financial risk modeling