# Convexity

> Convexity prices uncertain timing and optionality inside mortgage cash flows

| Field | Value |
|---|---|
| Stable ID | `node:kiduna:real-estate-mortgage:bond-math-tba:convexity` |
| Family | Bond Math & TBA Market |
| Domain | Economics |
| Era | Agentic Age |
| Kind | metric-or-force |
| Archetype | The Clock |
| Claim layers | empirical, cultural_historical, synthesis, interpretive, symbolic_divinatory |

## What it is

Convexity is a metric or force in the Bond Math & TBA Market family, defined here by the function it performs in the property system rather than by label alone.

## What it actually does

Convexity prices uncertain timing and optionality inside mortgage cash flows.

## Why it exists

It exists because place is unique and immovable while law, capital, information, and human lives must still coordinate around it across time.

## System mechanics

- **Who uses it:** underwriter, appraiser, investor, developer, regulator
- **Incentives:** comparability, predictive usefulness, decision speed, auditability
- **Inputs:** observations, definitions, time period, comparison set
- **Outputs:** signal, comparison, threshold, decision input
- **Dependencies:** Land, Authority, Information, Capital, Time

## Archetypal reading

- **Essence:** Convexity prices uncertain timing and optionality inside mortgage cash flows
- **Gift:** Clarity about convexity makes a hidden allocation of place, time, authority, value, or risk available for deliberate choice.
- **Wound / Shadow:** When convexity is treated as neutral or inevitable, its costs can be shifted to people who hold less information, authority, liquidity, or mobility.
- **Failure mode:** The failure mode appears when convexity is stale, opaque, mispriced, misrecorded, overextended, or applied outside the conditions that made it useful.

## Lenses

- **Personal:** Notice where convexity appears as a structure in your own commitments: what is held, promised, priced, protected, excluded, or deferred?
- **Business:** Convexity reveals a handoff among information, authority, incentives, operating work, and capital. Make the owner of each handoff explicit.
- **Financial:** Convexity changes the timing, priority, comparability, liquidity, or distribution of cash flow and risk.
- **Property:** Convexity changes how a physical place can be used, valued, financed, transferred, occupied, maintained, or reclaimed.
- **Community:** Convexity can create benefits inside one parcel while exporting costs or opportunity to neighbors, institutions, or future residents.

## Divination

The Clock enters the reading through Convexity. The issue is not only what is visible; it is which map of ownership, time, risk, authority, or belonging currently governs the situation.

**Question:** What is Convexity measuring—and which important reality has been left outside the denominator?

**Guidance:** Change the denominator, time horizon, and stakeholder. If the conclusion changes, the map—not only the number—was doing the work.

## Game function

Sets or modifies a threshold; players may stress it by changing rates, time, or cash flow. Initiative 4.

## Relationships

- **Overcollateralization is governed by Convexity.** Overcollateralization is governed by Convexity through a change in rights, information, cash flow, priority, timing, or physical use.
- **Duration amplifies Convexity.** Duration amplifies Convexity through a change in rights, information, cash flow, priority, timing, or physical use.
- **Convexity conflicts with Negative Convexity.** Convexity conflicts with Negative Convexity through a change in rights, information, cash flow, priority, timing, or physical use.
- **Convexity externalizes to Gestation Repo.** Convexity externalizes to Gestation Repo through a change in rights, information, cash flow, priority, timing, or physical use.

## Oppositions

- Use Value versus Exchange Value
- Speed versus Diligence

## Historical lineage and regulatory context

Read Convexity through the lineage of Bond Math & TBA Market: earlier customary or local arrangements became recorded, standardized, financed, regulated, digitized, or contested over time.

Rules vary by jurisdiction and transaction. Use the cited primary sources as starting points and verify current local law, program guides, contracts, and professional standards before operational use.

## Visual direction

Text-free rounded-square enamel artifact for Convexity: a calibrated enamel field where one measured boundary visibly changes the exposed and submerged portions of an asset; vitreous midnight enamel, blackened steel, warm brass, copper accents, mortgage-paper cream, deep green, slate, and sky blue.

## Engine output / Sentinel handoff

The generative interpretation above is preserved as Engine Output. Sentinel factors: jurisdiction-specific rules, factual uncertainty. These factors request contextual review; they do not delete or silently rewrite the candidate.

## Research / provenance

- [TBA Trading and Liquidity in the Agency MBS Market](https://www.newyorkfed.org/research/epr/2013/1212vick.html) — Federal Reserve Bank of New York; TBA mechanics and liquidity.
- [Agency Mortgage-Backed Securities Operations](https://www.newyorkfed.org/markets/desk-operations/ambs) — Federal Reserve Bank of New York; agency MBS operations, dollar rolls, coupon swaps.
- [Dodd-Frank Act Rulemaking: Asset-Backed Securities](https://www.sec.gov/spotlight/dodd-frank/assetbackedsecurities.shtml) — U.S. Securities and Exchange Commission; ABS and RMBS securitization, tranching, disclosure.
