Question: Consider the statement, The conclusion is that the more convex bond outperforms the less convex bond [Reading 55 Understanding Fixed Income risks and Returns, CFA

Consider the statement, ‘The conclusion is that the more convex bond outperforms the less convex bond…’ [Reading 55 ‘Understanding Fixed Income risks and Returns’, CFA Institute, 2014]. Explain this statement with the help of a diagram. Your answer should include a brief definition of ‘convex’ in this context.

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