Question
An institutions has Duration of Assets = 3.45 years and k D L = 0.87 years. The FI has total assets equal to $225 million.
An institutions has Duration of Assets = 3.45 years and k D L = 0.87 years. The FI has total assets equal to $225 million. The FI wishes to eectively reduce the duration gap by one year by hedging with T-bond futures that have a market value of $110,000 and a duration D F = 7 years. How many futures contracts are needed, if basis risk is ignored?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Institutions Management
Authors: Anthony Saunders
3rd Edition
007303259X, 978-0073032597
