How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask linda_us Your Own Question

linda_us
linda_us, Master's Degree
Category: Multiple Problems
Satisfied Customers: 1402
Experience:  A tutor for Business, Finance, Accounts and other related topics.
19873544
Type Your Multiple Problems Question Here...
linda_us is online now
A new question is answered every 9 seconds

Klein, CFA, manages a $100 million (market value) U.S.

Customer Question

Klein, CFA, manages a $100 million (market value) U.S. government bond portfolio for an institution. She anticipates a small parallel shift in the yield curve and wants to fully hedge the portfolio against any such change.
Security Modified Duration Basis Point Value Conversion Factor Portfolio Value/future contract price
Portfolio 10 years 100,000.00 Non Applicable 100,000,000
Bond Futures Contract 8 years 75.32 1 94-05
b. Formulate Klein's hedging strategy using only the futures contract shown. Calculate the number of futures contracts to implement the strategy. Show all calculations.
c. Determine how each of the following would change in value if interest rates increase by 10 basis points as anticipated. Show all calculations.
(1) The original portfolio
(2) The Treasury bond futures position
(3) The newly hedged portfolio
d. State three reasons why Klein's hedging strategy might not fully protect the portfolio against interest rate risk.
e. Describe a zero-duration hedging strategy using only the government bond portfolio and options on U.S. Treasury bond futures contracts. No calculations required.
Submitted: 9 months ago.
Category: Multiple Problems
Expert:  Manal Elkhoshkhany replied 9 months ago.

Hello,

Please click on the following link to download the solution:

https://app.box.com/s/dnqv03ow7gj1rv6dboeh59sj6f56idnk

If you have any questions, please do not hesitate to ask; if all is clear, please rate the service

P.S. If you like my services, please feel free to direct your future posts to me specifically by typing "For Manal Elkhoshkhany" at the beginning of your post. Should you choose to do this, please try to allow me at least 48 hours before the deadline. If you need to meet me online for a timed assignment, please advise me of the date and time (EST) you want me to meet you here and I will (Also please notify me at least 48 hours in advance) . Please make sure you take the length (and number) of the questions into consideration when making your offer to avoid delays in providing solutions.

Thank you

Related Multiple Problems Questions