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Suppose you want to hedge a $550 million bond portfolio with a duration of 5.2 years using 10 -year Treasury note futures with a duration
Suppose you want to hedge a $550 million bond portfolio with a duration of 5.2 years using 10 -year Treasury note futures with a duration of 7.6 years, a futures price of 10800, and 6 months to expiration. The notional value of Treasury note futures is $100,000. The Initial margin is $3,000 per futures contract and the maintenance margin is $2,000 per futures contract (a) How many contracts do you buy or sell? Round your answer to the nearest whole contract. (3points) (b) At what price would a margin call be triggered? Express your answer in the decimal version of price. Round your answer to the fourth decimal place (e.g. 123.1234 ) (2 points)
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