The Head of Risk Management at EXL Bank Ltd is evaluating the key data pertaining to deposits, loans, interest rates etc. The objective is to check bank's asset - liability position and act in line with the bank's risk mitigation approach. The Head of Risk Management collected the following information and found them significant from risk perspective. Evaluate these situations and give your recommendations. (a) As of March 31st 2020, EXL Bank's total assets and total liabilities are worth AED474 million and AED528 million respectively. The Head estimated that 85% of these assets and liabilities are interest rate sensitive. The Head collected economists' predictions about the macroeconomic factors for the next quarter. The economists are clearly predicting that the interest rate will move up in the next quarter. Do you think the Head of the Risk Management department should hedge this situation? What type of future or option contract would you suggest and why? and found that the duration of liabilities was 2.75 years and the duration of assets was 6.25 years. Given the levels of assets and liabilities (i.e. AED474 million in assets and AED528 million in liabilities), the Head is very much interested to hedge this duration gap. He is exploring to go for UAE Govt Bond Futures which are assumed to be priced at AED AED112.53 and have a duration of 9.76 years. The UAE Govt Bond is having a face value of AED1,000. Suggest the Head an appropriate strategy to hedge this duration gap so that the bank can cover its overall exposure