Question: What are the criticisms of using the duration model to
What are the criticisms of using the duration model to immunize an FI’s portfolio?
Answer to relevant QuestionsWhat is convexity?What is the spread effect?Consider the following. a. What is the duration of a two-year bond that pays an annual coupon of 10 percent and whose current yield to maturity is 14 percent? Use $ 1,000 as the face value. b. What is the expected change in ...Suppose that you purchase a Treasury bond futures contract at $ 95 per $ 100 of face value. a. What is your obligation when you purchase this futures contract? b. If an FI purchases this contract, in what kind of hedge is it ...How does a pure credit swap differ from a total return swap?
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