An investor wishes to hedge a bond with a par value of $250,000,000 with Treasury...
90.2K
Verified Solution
Link Copied!
Question
Accounting
An investor wishes to hedge a bond with a par value of $250,000,000 with Treasury bond futures. Assume that 1) the conversion factor for the cheapest-to-deliver issue is 1.0176; 2) the price value of a basis point (PV01) of the cheapest-to-deliver issue at the settlement date is 0.0742; 3) the price value of a basis point (PV01) for the bond to be hedged is 0.06680.
a) What is the hedge ratio?
b) How many Treasury bond futures should be purchased/sold to hedge the bond?
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Best
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.