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4. During a market crash, explain the reasons for the following observations. a. Fixed-income portfolio hedged with short-term Treasury bonds lose more than those hedged

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4. During a market crash, explain the reasons for the following observations. a. Fixed-income portfolio hedged with short-term Treasury bonds lose more than those hedged with interest rate swaps given equivalent duration. [12 marks] b. The spreads between off-the run bonds and benchmark issues widen. [12 marks] [Total: 24 marks)

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