Question
You manage a bond portfolio with a current value of $150,000,000 & a duration of 7.32. You need to hedge the interest rate risk of
You manage a bond portfolio with a current value of $150,000,000 & a duration of 7.32. You need to hedge the interest rate risk of this portfolio for some reason. Today's date is Monday 12/10/2018, so the settlement price for a treasury bond is the 11th. You decide to use the 10 year t-note futures to hedge. The cheapest to deliver bond is the 3 percent coupon bond with maturity date of 09/30/2025 which is currently selling for a yield of 2.766% (price of 101.4766 or 1.014766 per $1 of face value).
Question: How many futures contracts do you enter into?
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