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2. Consider a portfolio that includes 10 private loans of $120,000 each and 200 bonds that costs $1500 each. Each private loan has a
2. Consider a portfolio that includes 10 private loans of $120,000 each and 200 bonds that costs $1500 each. Each private loan has a duration of 4 and convexity of 8.5 and each bond have a duration of 12.5 and a convexity of 22.5. a) Find the DV01 of a private loan and a bond. b) Find DV01, D, and C of the portfolio. c) You want to hedge the interest rate risk for your portfolio using T-bills with D=2.5, C=18, and market price P=$950 and T-notes with D=3.5, C=12, and market price P=$1000. How many bills and notes you need to buy/sell.
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a DV01 Dollar Value of 01 represents the change in the bond or loans price for a 1 basis point 001 change in yield It is calculated by dividing the bo...
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Fixed Income Analysis
Authors: Barbara S. Petitt
5th Edition
1119850541, 978-1119850540
