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Big Bank, Inc. has a portfolio of Treasury bonds worth $1,000,000 with a modified duration of 16.5 and is concerned that a change in interest
Big Bank, Inc. has a portfolio of Treasury bonds worth $1,000,000 with a modified duration of 16.5 and is concerned that a change in interest rates will negatively affect the value of the portfolio. The newest MBA in the office has been asked to determine the optimal hedge ratio if the futures contract has a value of $98,000 and has a modified duration of 9.25 years. Help this new MBA out.
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To determine the optimal hedge ratio we need to calculate the ratio of the modified duration ...
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Financial Institutions Management A Risk Management Approach
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
8th edition
978-0078034800, 78034809, 978-0071051590
