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Please so all step, and all equations broken down, even for calculation as simple as, for example, standard deviation:Thanks 1)Considerthe following fixed-income securities making annual
Please so all step, and all equations broken down, even for calculation as simple as, for example, standard deviation:Thanks
1)Considerthe following fixed-income securities making annual payments:
Instrument | Coupon | Maturity | Yield |
A | 8% | 10 | 10% |
B | 10% | 15 | 8% |
How much of Instrument B is necessary to hedge A? (Hint: the hedge A using Instrument B, you need to structure A and B such that Price Change in A + Price Change in B * Number of Instrument B to be used = 0. You can then relate the price change in A to duration of A.)
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