A manager wishes to hedge a bond with a par value of $20 mil…
A manager wishes to hedge a bond with a par value of $20 million by selling Treasury bond futures. Suppose that the standard deviation for the bond to be hedged and the hedging instrument are 0.09 and 0.10, respectively and the correlation between the two is 0.85. a. What is the hedge ratio? b. How many Treasury bond futures contracts should be sold to hedge the bond if Treasuries are trading at $100,000?
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