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Atrader holds a long position year 2020) of $1 MM of the 8 percent bond maturing 2040. The band's moddied duration is 11.14692, and it
Atrader holds a long position year 2020) of $1 MM of the 8 percent bond maturing 2040. The band's moddied duration is 11.14692, and it price is $129.87596. Its BPV is 0.14477. The trader decides to protect the position against a rise in interest rates by hedging it using the ZCB maturing in 2040, which has a Basis Point Value of 0.05549. Assume that the yield beta is 1.2. What nominal value of the zero coupon bond must the trade sell? To hedge 51 MM of the 20 year bond, the trader must long 53,130,726 of the zero coupon bond. To hedge 51 MM of the 20 year bond, the trader must short $3,130,726 of the zero coupon bond. o To hedge 51 MM of the 20 year bond, the trader must short 52,608 940 of the rero coupon bond. To hedge 51 MM of the 20 year bond, the trader must long 52,608,940 of the zero coupon bond
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