III DERIVATIVES It is January 2020 You are a portfolio manager for a broadly diversified fixed income portfolio Your portfolio management team is worried about a negative economic shock, similar to what we have recently experienced Explain how you would utilize 2 of the following derivative securities to improve returns and or reduce the risk in your portfolio You only need to write a few sentences about each derivative security Remember, you only need to choose 2 Credit Default Swaps What risk(s) and or securities would you be hedging Explain whether you be long or short Why What would be the maturity in years Why What would be the underlying security or index Why Interest Rate Swaps What risk(s) and or securities would you be hedging Explain whether you would receive fixed or floating Why What would be the maturity in years Why What would be the underlying security or index Why Treasury Futures What risk(s) and or securities would you be hedging Explain whether you be long or short Why What would be the maturity in years Why What would be the underlying security or index Why

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III. DERIVATIVES It is January 2020. You are a portfolio manager for a broadly diversified fixed income portfolio. Your portfolio management team is worried about

III. DERIVATIVES

It is January 2020. You are a portfolio manager for a broadly diversified fixed income portfolio. Your portfolio management team is worried about a negative economic shock, similar to what we have recently experienced. Explain how you would utilize 2 of the following derivative securities to improve returns and / or reduce the risk in your portfolio. You only need to write a few sentences about each derivative security. Remember, you only need to choose 2.

Credit Default Swaps
1. What risk(s) and / or securities would you be hedging?
2. Explain whether you be long or short. Why?
3. What would be the maturity in years? Why?
4. What would be the underlying security or index? Why?
Interest Rate Swaps
1. What risk(s) and / or securities would you be hedging?
2. Explain whether you would receive fixed or floating. Why?
3. What would be the maturity in years? Why?
4. What would be the underlying security or index? Why?
Treasury Futures
1. What risk(s) and / or securities would you be hedging?
2. Explain whether you be long or short. Why?
3. What would be the maturity in years? Why?
4. What would be the underlying security or index? Why?