Consider the data in question Q3. below. a) What is the forward price today for delivering at
Question:
Consider the data in question Q3. below.
a) What is the forward price today for delivering at date t2 = 6m a zcb with face value$100,000 maturing at t4 = 1y?
b) What is the forward price for delivering the bond in Q3.b) at t2 = 6m (per $100 face value)? [It suffices to report the dirty price.]
c) Suppose that you have such a forward position (acquired earlier) with a delivery price of K = $101.125 for $24.325M face value. What is the value of your forward position?
d) What is the dollar duration of this position? This quantity captures, to the first order, the dollar change induced by the entire yield curve shifting down by1.
[Hint: Think of all the cash flows the forward position confers until the maturity of the bond, t7 = 21m. The forward position is a “portfolio” of all these cashflows.]
Q3. Consider the discount factors for the following eight dates
Date 3m 6m 9m 1y 15m 18m 21m 2y
Price 0.9908 0.9809 0.9702 0.9589 0.9470 0.9346 0.9217 0.9085