
Concept explainers
To calculate: The number of bonds to be sold for hedging the risk surrounding the position in which both the bond and the contract are at par value.
Introduction: When there is market down, to overcome this situation selling of bonds is better solution. The hedging strategy is used to maintain the position in the market and minimize the risk value.

Answer to Problem 17PS
The number of bonds is 133 to be sold to hedge the position.
Explanation of Solution
Now calculate the value change in treasury future,
Hence the change in 1-basis point on treasury bonds is $60.
Now,
Hence the 133 bonds should be sold to hedge the position in market.
Want to see more full solutions like this?
Chapter 23 Solutions
GEN COMBO LOOSELEAF INVESTMENTS; CONNECT ACCESS CARD
- solve this question.Pat and Chris have identical interest-bearing bank accounts that pay them $15 interest per year. Pat leaves the $15 in the account each year, while Chris takes the $15 home to a jar and never spends any of it. After five years, who has more money?arrow_forwardWhat is corporate finance? explain all thingsarrow_forwardSolve this finance problem.arrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTIntermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning


