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At t = 0, r0, 2 = 4 percentage and r0, 10 = 8 percentage. You want to put on a yield curve flattening trade,
At t = 0, r0, 2 = 4 percentage and r0, 10 = 8 percentage. You want to put on a yield curve flattening trade, such that for every 1 percentage of flattening you will make dollar 1,000 profit. You can trade 2- year and 10-year 0-coupon bonds at t = 0. For each bond, specify how much you are trading in PV terms and whether you are long or short. At t = 0, r0, 2 = 4 percentage and r0, 10 = 8 percentage. You want to put on a yield curve flattening trade, such that for every 1 percentage of flattening you will make dollar 1,000 profit. You can trade 2- year and 10-year 0-coupon bonds at t = 0. For each bond, specify how much you are trading in PV terms and whether you are long or short
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