A tool that measures the sensitivity of convexity of duration or modified duration to a change in yield. It could also refer to the convexity of modified duration itself. Additionally, it often refers to the third derivative of the value of a financial instrument with respect to its yield.

Xerxes is said to be related to hedge rebalancing because a hedge based on eliminating xerxes (i.e., letting it approach zero) can be considered a step beyond the so-called convexity hedging, which is, per se, a step further with regard to matching durations. Little rebalancing is required if convexity hedging is boosted by xerxes “hedging”.