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An FI has a $ 2 1 0 million asset portfolio that has an average duration of 6 . 6 years. The average duration of
An FI has a $ million asset portfolio that has an average duration of years. The average duration of its $ million in liabilities is years. Assets and liabilities are yielding percent. The FI uses put options on Tbonds to hedge against unexpected interest rate increases. The average delta delta of the put options has been estimated at and the average duration of the Tbonds is years. The current market value of the Tbonds is $ Put options on Tbonds are selling at a premium of $ per face value of $ a What is the modified duration of the Tbonds if the current level of interest rates is percent? Do not round intermediate calculations. Round your answer to decimal places. eg b How many put option contracts should the FI purchase to hedge its exposure against rising interest rates? The face value of the Tbonds is $Do not round intermediate calculations. Round your answer to the nearest whole number. c If interest rates increase basis points, what will be the change in value of the equity of the FIEnter your answer in dollars not in millions. Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest dollar amount. d If interest rates increase basis points, what will be the change in value of the Tbond option hedge position? Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest dollar amount. e What must be the change in interest rates before the change in value of the balance sheet equity will offset the cost of placing the hedge? Do not round intermediate calculations. Negative value should be indicated by a minus sign. Round your answer to decimal places. eg f How much must interest rates change before the payoff of the hedge will exactly cover the cost of placing the hedge? Do not round intermediate calculations. Round your answer to decimal places. eg
An FI has a $ million asset portfolio that has an average duration of years. The average duration of its $ million in liabilities is years. Assets and liabilities are yielding percent. The FI uses put options on Tbonds to hedge against unexpected interest rate increases. The average delta delta of the put options has been estimated at and the average duration of the Tbonds is years. The current market value of the Tbonds is $ Put options on Tbonds are selling at a premium of $ per face value of $
a What is the modified duration of the Tbonds if the current level of interest rates is percent? Do not round intermediate calculations. Round your answer to decimal places. eg
b How many put option contracts should the FI purchase to hedge its exposure against rising interest rates? The face value of the Tbonds is $Do not round intermediate calculations. Round your answer to the nearest whole number.
c If interest rates increase basis points, what will be the change in value of the equity of the FIEnter your answer in dollars not in millions. Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest dollar amount.
d If interest rates increase basis points, what will be the change in value of the Tbond option hedge position? Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest dollar amount.
e What must be the change in interest rates before the change in value of the balance sheet equity will offset the cost of placing the hedge? Do not round intermediate calculations. Negative value should be indicated by a minus sign. Round your answer to decimal places. eg
f How much must interest rates change before the payoff of the hedge will exactly cover the cost of placing the hedge? Do not round intermediate calculations. Round your answer to decimal places. eg
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