What comprises a butterfly design meant to add convexity?

A butterfly design intended to add convexity involves a long position in two bonds with longer maturities (the "wings") and a short position in a bond with an intermediate maturity (the "body"). By employing this structure, an investor enhances the portfolio's sensitivity to interest rate changes, or convexity, which benefits when interest rates are volatile.

In the context of the provided chosen answer, the description of a long barbell refers to holding long positions in bonds at the extremes of the maturity spectrum, while the short bullet corresponds to the intermediate bond that is sold short. This structure effectively captures the benefits of greater price appreciation when rates drop and limits losses when rates rise, thereby achieving the desired convexity.

Other selections do not align with the concept of a butterfly design aimed at adding convexity. For instance, a short barbell and long bullet would not create the intended sensitivity dynamics, and similarly, a flat yield curve or a zero-coupon bond does not encapsulate the multi-maturity aspect necessary for a butterfly configuration.