Village Bank has $310 million worth of assets with a duration of 12 years and liabilities worth $248 million with a dura
Posted: Sun May 29, 2022 6:34 pm
Village Bank has $310 million worth of assets with a duration of
12 years and liabilities worth $248 million with a duration of five
years. In the interest of hedging interest rate risk, Village Bank
is contemplating a macrohedge with interest rate T-bond futures
contracts now selling for 104-20 (30nds). The T-bond underlying the
futures contract has a duration of eight years. If the spot and
futures interest rates move together, how many futures contracts
must Village Bank sell to fully hedge the balance sheet?
12 years and liabilities worth $248 million with a duration of five
years. In the interest of hedging interest rate risk, Village Bank
is contemplating a macrohedge with interest rate T-bond futures
contracts now selling for 104-20 (30nds). The T-bond underlying the
futures contract has a duration of eight years. If the spot and
futures interest rates move together, how many futures contracts
must Village Bank sell to fully hedge the balance sheet?