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A bank has $650 million of assets with a duration of eight years and $575 million of liabilities with a duration of four year. the
A bank has $650 million of assets with a duration of eight years and $575 million of liabilities with a duration of four year. the bank want to hedge it duration gap with a swap that has a fixed-rate payments with a duration of seven years and floating-rate payment with a duration of three years. What is the optimal amount of the swap to effectively macrohedge against the adverse effect of a change in interest rates on the value of the bank's equity?
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