In order to understand the ramifications of a Federal Reserve taper on the prices of a bond or bond portfolio, what is needed is a bond convexity primer.In the parlance of those who know calculus, convexity is the second derivative. For the layperson this is known as the rate of change in change. For convexity to make better sense, let me compare it to driving a car. Want to change your speed (i.e., the rate of change). Then you either give the car more gas with the accelerator or press down on the brakes to slow the car down.
Speeding up and slowing down are the second derivative. You can review your cookie options at any time by clicking on the Cookies link at the foot of each page.