Explain 'convexity' and why it matters for bond price sensitivity.

• A. Convexity measures the slope of the price-yield line.
• B. Convexity measures the curvature of the price-yield relationship; positive convexity means price gains faster when yields fall and fall slower when yields rise, improving hedging.
• C. Convexity is the same as duration.
• D. Convexity has no practical effect on hedging.

Answer: (B)