What is bond convexity?

Convexity refers to the degree to which a bond's price response to interest rate changes follows a curve rather than a straight line, and it is defined as the second derivative of price with respect to the interest rate.

Duration approximates this relationship as a straight line, so the more curved the price curve, the less accurate price changes calculated with duration alone become. That is why convexity is also taken into account when estimating price changes for large interest rate moves.