the discount rate, but rather a convex function of the discount rate. Specifically, duration can be formulated as the first derivative of the price with respect to the interest rate, and convexity as the second derivative (see: Bond duration closed-form formula; Bond convexity closed-form formula; Taylor series). Continuing the above example, for a more accurate estimate of sensitivity, the convexity score would be multiplied by the square of the change in interest rate, and the result added to the value derived by the above linear formula. For embedded options, see effective duration and effective convexity. Accounting treatment In accounting for liabilities, any bond discount or premium must be amortized over the life of the bond. A number of methods may be used for this depending on applicable accounting rules. One possibility is that amortization amount in each period is calculated from the following formula: = amortization amount in period number "n+1" Bond Discount or Bond Premium = = Bond Discount or Bond Premium = See also List of bond valuation topics Asset swap spread Bond convexity Bond duration Bond option Clean price Coupon yield Current yield Dirty price I-spread Option-adjusted spread Yield to maturity Z-spread References Selected bibliography External links Bond Valuation, Prof. Campbell R. Harvey, Duke University A Primer on the Time Value of Money, Prof. Aswath Damodaran, Stern School of Business Basic Bond Valuation Prof. Alan R. Palmiter, Wake Forest University Bond Price Volatility Investment Analysts Society of South Africa Duration and convexity Investment Analysts Society of South Africa Bond market Fixed income analysis