You hold a $50 million portfolio of par value bonds with a coupon rate of 10% paid annually and 15 years to maturity. How many T-bond futures contracts do you need to hedge the portfolio against an unanticipated change in the interest rate of 0.18%? Assume the market interest rate is 10% and that T-bond futures contracts call for delivery of an 8% coupon (paid annually), 20-year maturity T-bond.

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08-06-2024
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You hold a $50 million portfolio of par value bonds with a coupon rate of 10% paid annually and 15 years to maturity. How many T-bond futures contracts do you need to hedge the portfolio against an unanticipated change in the interest rate of 0.18%? Assume the market interest rate is 10% and that T-bond futures contracts call for delivery of an 8% coupon (paid annually), 20-year maturity T-bond.

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