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Hedging Financial Risks with Financial Derivatives (5 marks) As a pension fund manager, you considered in April 2021 that the Canada 55 of 2035 was
Hedging Financial Risks with Financial Derivatives (5 marks) As a pension fund manager, you considered in April 2021 that the Canada 55 of 2035 was a good investment, and you wanted to purchase $2,189,859 of these bonds to strategically balance your investment portfolio. However, your next major cash receipts were not due until December 2021. You were concerned that interest rates could tall by December 2021. Part 1: What simple options contract in April 2021 would hedge interest rate risk for your scheduled December 2021 bond purchase: Would you buy a call option, sell a call option, buy a put option, or sell a put option? Click for List v
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