Description of this paper

Loading

The following OATs are available as hedging instruments: OAT-(Answered)

Description

Instant Solution ? Click "Buy button" to Download the solution File


Question

The following OATs are available as hedging instruments:

OAT Coupon rate Maturity clean price
15 3.75% 25/10/2019 114.77
16 3.25% 25/10/2021 118.11
17 5.5% 25/04/20209

153.11

These prices were obtained as of March 15, 2016. As a fixed income manager, you hold a portfolio that is long the following 10 bonds:

OAT COUPON RATE % MATURITY CLEAN PRICE YTM
1 4,25 25-oct-17 107,53 -0,39500%
2 4 25-avr-18 109,24 -0,3510%
3 4,25 25-avr-19 114,2 -0,2860%
4 3,5 25-avr-20 115,29 -0,1990%
5 3,25 25-oct-21 118,48 -0,0390%
6 8,25 25-avr-22 150,36 0,0080%
7 4,25 25-oct-23 130,56 0,2000%
8 3,5 25-avr-26 128,3 0,6060%
9 5,75 25-Apr-32 169,8 1,1210%
10 4,75 25-Apr-35 158,57

1,2770%

Use the YTM and any of the hedging instruments above to form a portfolio that is insensitive to a small parallel shift in the yield curve. Calculate the P/L of the unhedged and hedge portfolios if dy = 0.1% and dy = 2%

 

Paper#9210450 | Written in 27-Jul-2016

Price : $19
SiteLock