Question: What is convexity? How does convexity affect duration-based predicted price changes for interest rates changes? Given the functions of the money markets, why is it

  1. What is convexity? How does convexity affect duration-based predicted price changes for interest rates changes?
  2. Given the functions of the money markets, why is it necessary for money market securities to have a maturity of one year or less and low default risk?

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