Problem 3 - Long convexity of butterfly strategies We saw in class that for parallel shifts (in either direction) a long butterfly trade, where one goes long zeros of respective maturities T, and T3 years and short a zero of T2 years where T 0 for all T. As a consequence of g being convex (you do not need to prove this fact as you can find it from any calculus textbooks), we have that for any s 9(B8+ (1 - B)t) 4. Explain why you can conclude that CB > CA and hence a long butterfly is long convexity Problem 3 - Long convexity of butterfly strategies We saw in class that for parallel shifts (in either direction) a long butterfly trade, where one goes long zeros of respective maturities T, and T3 years and short a zero of T2 years where T 0 for all T. As a consequence of g being convex (you do not need to prove this fact as you can find it from any calculus textbooks), we have that for any s 9(B8+ (1 - B)t) 4. Explain why you can conclude that CB > CA and hence a long butterfly is long convexity