Answers%20Revision%20for%20Exam%201 - FUTURES a Short or...

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Unformatted text preview: FUTURES a) Short or Long? Duration of Assets 6 Duration of Liabilities 4 Leverage coefficient 0.9 Duration gap 2.4 Duration gap is positive, hence FI is exposed to rise in interest rates. Thus, FI should take short position in Future contract b) How many contracts? Semiannual payments, therefore 40 periods 1. Duration of underlying bond YTM 4.26%FOUND VIA 'GOAL SEEK' 1 40 38 38 2 40 37 74 3 40 35 106 4 40 34 135 5 40 32 162 6 40 31 187 7 40 30 209 8 40 29 229 9 40 27 247 10 40 26 263 11 40 25 278 12 40 24 291 13 40 23 302 14 40 22 312 15 40 21 321 16 40 21 328 17 40 20 334 18 40 19 340 19 40 18 344 20 40 17 347 21 40 17 350 22 40 16 351 23 40 15 352 24 40 15 353 25 40 14 352 26 40 14 351 27 40 13 350 28 40 12 348 29 40 12 346 30 40 11 343 31 40 11 340 32 40 11 337 33 40 10 333 34 40 10 329 35 40 9 325 36 40 9 320 37 40 9 316 38 40 8 311 39 40 8 306 40 1040 196 7,834 Price 950 Duration of underlying bond 10.05 years 2. Number of contracts Total assets 150,000,000 Price of Future contract...
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This note was uploaded on 03/11/2012 for the course FIN FIN 3230 taught by Professor Petrivanov during the Spring '12 term at Kazakhstan Institute of Management, Economics and Strategic Research.

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Answers%20Revision%20for%20Exam%201 - FUTURES a Short or...

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