Your $10M bond portfolio has a yield of 4%; a weighted average maturity of 7 years, and a weighted average modified duration of 5 years. You wish to hedge the interest rate risk by shorting a long-term bond futures contact with a 20-year modified duration. How many dollars of the future's contract do you need to short to hedge out most of your interest rate risk?

Answer rating: 100% (QA)

To hedge out most of the interest rate risk in your bond portfolio you can use the concept of durat... View the full answer