A fixed - income money manager has a bond portfolio of BB + corporate bond with market
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Question:
A fixedincome money manager has a bond portfolio of BB corporate bond with market value $ million and a duration of years.
The manager wishes to crosshedge the bond portfolio against interest rate risk.
There is a futures contract on a portfolio of AAA bonds available which the manager decides is the best hedge. The portfolio of AAA bonds has a value of $ and a maturity of years.
How many short futures contract should the manager enter into for a hedge against the market moves for the BB corporate bond portfolio?
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