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.

Question

Want to see more full solutions like this?

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.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Which statement is not true regarding the market portfolio? Group of answer choices a. It includes all publicly-traded financial assets. b. It lies on the efficient frontier. c. All securities in the market portfolio are held in proportion to their market values. d. It is the tangency point between the capital market line and the indifference curve.

Discuss how market interest rates are affected by borrowers' need for capital, expected inflation, different securities' risks, and securities' liquidity. • Describe how risk aversion affects a stock's required rate of return.

What is the Security Market Line (SML)? How isbeta related to a stock’s required rate of return?

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.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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

Concept explainers

Videos

Answer to Problem 1PS

Explanation of Solution

Want to see more full solutions like this?

Chapter 23 Solutions