convexity

问题如下：

Given the following bond portfolios:

Which of the following statements is correct?

选项：

A.Portfolio 1 is a barbell portfolio. B.Portfolio 2 is a bullet portfolio. C.It is impossible for Portfolios 1 and 2 to have the same duration. D.Portfolio 2 will have greater convexity than Portfolio 1.

解释：

Since Portfolio 2 has more long-term bonds than short-term bonds and since convexity is related to the square of maturity, Portfolio 2 will have greater convexity. The other statements are incorrect. Portfolio 1 is a bullet portfolio (concentrated in intermediate maturities), and Portfolio 2 is a barbell. It is possible for a bullet and a barbell to have the same duration. In fact, adding the duration contribution of both portfolios gives a duration value of 8.15.