A portfolio manager plans to use a Treasury bond futures contract to hedge a bond portfolio over
Question:
a. What adjustments to the hedge are necessary if after one month the bond that is expected to be cheapest to deliver changes to one with a duration of seven years?
b. Suppose that all rates increase over the three months, but long-term rates increase less than short-term and medium-term rates. What is the effect of this on the performance of the hedge?
Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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The number of short futures contracts required is Rounding to the ...View the full answer
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