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Q1-8. A market maker wants to delta hedge a long position of $10 million in...

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Finance

Q1-8. A market maker wants to delta hedge a long position of $10 million in face value of 20-year bonds with 30-year bonds until he/she finds a buyer of the 20-year bonds. DV01 of the 20-year bond is 0.1184 and DV01 of the 30-year bond is 0.1429. If the 20-year yield is expected to rise 1.1bp for each 1bp increase in the 30-year bond, what should be the position of the 30-year bond for this market maker?

A. Short position of $13.28 million B. Long position of 13.28 million C. Short position of 10.97 million D. Short position of 9.11 million E. Short position of 7.53 million

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