Answer: A

For LARGE parallel shifts in the yield curve, the barbell portfolio typically outperforms the bullet portfolio due to its higher convexity.

Reasoning:

• Convexity effect: Higher convexity in the barbell portfolio provides better price protection against large interest rate movements
• Price-yield relationship: For large rate changes, the convexity term becomes more significant in the price change calculation
• Mathematical basis: Price change ≈ -Duration × Δy + ½ × Convexity × (Δy)²

Since the barbell has higher convexity, it benefits more from the squared term when Δy is large.