Compare the stock‘s beta value and bond duration to hedge the risk and the difference in calculating a hedge position in each market. Introduction: To hedge the risk both tools are used. But there is calculation difference, beta value is given by the market index value and bond value is given by the dollar value’s change. Bond duration is the maturity period of the bond or investment.

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Answer 1

Question

Chapter 23, Problem 1PS

Summary Introduction

To explain: Compare the stock‘s beta value and bond duration to hedge the risk and the difference in calculating a hedge position in each market.

Introduction: To hedge the risk both tools are used. But there is calculation difference, beta value is given by the market index value and bond value is given by the dollar value’s change. Bond duration is the maturity period of the bond or investment.

Expert Solution & Answer

Answer to Problem 1PS

Beta value is evaluated by index value whereas bond value is calculated by the change in dollar value.

Explanation of Solution

The beta value and bond duration are used to hedge the market risk without affecting the performance of portfolio. These tools provide to compute the gain and loss of the portfolio. The change percentage value used to compute the dollar change value. By using dollar value hedge ratio is calculated. The beta value is calculated with respect to the market index and that change is calculated for the specified market index. If beta value is positive then there is reduction in market portfolio. Here, investors face a loss those have a long position in market.

Bond duration calculation differs from the beta value. Bond value is calculated by the change of dollar value to the portfolio with respect to the future contracts. The value change in dollar gives the hedge ratio of the portfolio.

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Answer 2

Question

Chapter 23, Problem 1PS

Summary Introduction

To explain: Compare the stock‘s beta value and bond duration to hedge the risk and the difference in calculating a hedge position in each market.

Introduction: To hedge the risk both tools are used. But there is calculation difference, beta value is given by the market index value and bond value is given by the dollar value’s change. Bond duration is the maturity period of the bond or investment.

Expert Solution & Answer

Answer to Problem 1PS

Beta value is evaluated by index value whereas bond value is calculated by the change in dollar value.

Explanation of Solution

The beta value and bond duration are used to hedge the market risk without affecting the performance of portfolio. These tools provide to compute the gain and loss of the portfolio. The change percentage value used to compute the dollar change value. By using dollar value hedge ratio is calculated. The beta value is calculated with respect to the market index and that change is calculated for the specified market index. If beta value is positive then there is reduction in market portfolio. Here, investors face a loss those have a long position in market.

Bond duration calculation differs from the beta value. Bond value is calculated by the change of dollar value to the portfolio with respect to the future contracts. The value change in dollar gives the hedge ratio of the portfolio.

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Answer 3

Question

Chapter 23, Problem 1PS

Summary Introduction

To explain: Compare the stock‘s beta value and bond duration to hedge the risk and the difference in calculating a hedge position in each market.

Introduction: To hedge the risk both tools are used. But there is calculation difference, beta value is given by the market index value and bond value is given by the dollar value’s change. Bond duration is the maturity period of the bond or investment.

Expert Solution & Answer

Answer to Problem 1PS

Beta value is evaluated by index value whereas bond value is calculated by the change in dollar value.

Explanation of Solution

The beta value and bond duration are used to hedge the market risk without affecting the performance of portfolio. These tools provide to compute the gain and loss of the portfolio. The change percentage value used to compute the dollar change value. By using dollar value hedge ratio is calculated. The beta value is calculated with respect to the market index and that change is calculated for the specified market index. If beta value is positive then there is reduction in market portfolio. Here, investors face a loss those have a long position in market.

Bond duration calculation differs from the beta value. Bond value is calculated by the change of dollar value to the portfolio with respect to the future contracts. The value change in dollar gives the hedge ratio of the portfolio.

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Answer 4

Question

Chapter 23, Problem 1PS

Summary Introduction

To explain: Compare the stock‘s beta value and bond duration to hedge the risk and the difference in calculating a hedge position in each market.

Introduction: To hedge the risk both tools are used. But there is calculation difference, beta value is given by the market index value and bond value is given by the dollar value’s change. Bond duration is the maturity period of the bond or investment.

Expert Solution & Answer

Answer to Problem 1PS

Beta value is evaluated by index value whereas bond value is calculated by the change in dollar value.

Explanation of Solution

The beta value and bond duration are used to hedge the market risk without affecting the performance of portfolio. These tools provide to compute the gain and loss of the portfolio. The change percentage value used to compute the dollar change value. By using dollar value hedge ratio is calculated. The beta value is calculated with respect to the market index and that change is calculated for the specified market index. If beta value is positive then there is reduction in market portfolio. Here, investors face a loss those have a long position in market.

Bond duration calculation differs from the beta value. Bond value is calculated by the change of dollar value to the portfolio with respect to the future contracts. The value change in dollar gives the hedge ratio of the portfolio.

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Answer 5

Chapter 23, Problem 1PS

Summary Introduction

To explain: Compare the stock‘s beta value and bond duration to hedge the risk and the difference in calculating a hedge position in each market.

Introduction: To hedge the risk both tools are used. But there is calculation difference, beta value is given by the market index value and bond value is given by the dollar value’s change. Bond duration is the maturity period of the bond or investment.

Expert Solution & Answer

Answer to Problem 1PS

Beta value is evaluated by index value whereas bond value is calculated by the change in dollar value.

Explanation of Solution

The beta value and bond duration are used to hedge the market risk without affecting the performance of portfolio. These tools provide to compute the gain and loss of the portfolio. The change percentage value used to compute the dollar change value. By using dollar value hedge ratio is calculated. The beta value is calculated with respect to the market index and that change is calculated for the specified market index. If beta value is positive then there is reduction in market portfolio. Here, investors face a loss those have a long position in market.

Bond duration calculation differs from the beta value. Bond value is calculated by the change of dollar value to the portfolio with respect to the future contracts. The value change in dollar gives the hedge ratio of the portfolio.

Answer 6

Chapter 23, Problem 1PS

Summary Introduction

To explain: Compare the stock‘s beta value and bond duration to hedge the risk and the difference in calculating a hedge position in each market.

Introduction: To hedge the risk both tools are used. But there is calculation difference, beta value is given by the market index value and bond value is given by the dollar value’s change. Bond duration is the maturity period of the bond or investment.

Expert Solution & Answer

Answer to Problem 1PS

Beta value is evaluated by index value whereas bond value is calculated by the change in dollar value.

Explanation of Solution

The beta value and bond duration are used to hedge the market risk without affecting the performance of portfolio. These tools provide to compute the gain and loss of the portfolio. The change percentage value used to compute the dollar change value. By using dollar value hedge ratio is calculated. The beta value is calculated with respect to the market index and that change is calculated for the specified market index. If beta value is positive then there is reduction in market portfolio. Here, investors face a loss those have a long position in market.

Bond duration calculation differs from the beta value. Bond value is calculated by the change of dollar value to the portfolio with respect to the future contracts. The value change in dollar gives the hedge ratio of the portfolio.

Answer 7

Chapter 23, Problem 1PS

Summary Introduction

To explain: Compare the stock‘s beta value and bond duration to hedge the risk and the difference in calculating a hedge position in each market.

Introduction: To hedge the risk both tools are used. But there is calculation difference, beta value is given by the market index value and bond value is given by the dollar value’s change. Bond duration is the maturity period of the bond or investment.

Answer 8

Expert Solution & Answer

Answer to Problem 1PS

Beta value is evaluated by index value whereas bond value is calculated by the change in dollar value.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

The beta value and bond duration are used to hedge the market risk without affecting the performance of portfolio. These tools provide to compute the gain and loss of the portfolio. The change percentage value used to compute the dollar change value. By using dollar value hedge ratio is calculated. The beta value is calculated with respect to the market index and that change is calculated for the specified market index. If beta value is positive then there is reduction in market portfolio. Here, investors face a loss those have a long position in market.

Bond duration calculation differs from the beta value. Bond value is calculated by the change of dollar value to the portfolio with respect to the future contracts. The value change in dollar gives the hedge ratio of the portfolio.

Answer 12

Ch. 23 - Prob. 1PS Ch. 23 - Prob. 2PS Ch. 23 - Prob. 3PS Ch. 23 - Prob. 4PS Ch. 23 - Prob. 5PS Ch. 23 - Prob. 6PS Ch. 23 - Prob. 7PS Ch. 23 - Prob. 8PS Ch. 23 - Prob. 9PS Ch. 23 - Prob. 10PS

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