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Pension fund UPNC has a fixed-income portfolio consisting of A=500M in assets and L=700M in liabilities. The duration of the assets is DA=17 and that
Pension fund UPNC has a fixed-income portfolio consisting of A=500M in assets and L=700M in liabilities. The duration of the assets is DA=17 and that of the liabilities is Di=27. To bring the duration of the overall portfolio to zero, UPNC is considering taking a position in a 5-year swap whose dollar duration for the fixed receiver, per dollar of notional, is Ds=4.3. What is the notional amount on which UPNC should open a 5-year swap? Use the convention that a positive amount corresponds to being a fixed receiver, while a negative amount means paying fixed. Express the answer in million (not thousands, hundred million, etc.). Pension fund UPNC has a fixed-income portfolio consisting of A=500M in assets and L=700M in liabilities. The duration of the assets is DA=17 and that of the liabilities is Di=27. To bring the duration of the overall portfolio to zero, UPNC is considering taking a position in a 5-year swap whose dollar duration for the fixed receiver, per dollar of notional, is Ds=4.3. What is the notional amount on which UPNC should open a 5-year swap? Use the convention that a positive amount corresponds to being a fixed receiver, while a negative amount means paying fixed. Express the answer in million (not thousands, hundred million, etc.)
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