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Business, 21.03.2020 09:40 DrippyGanja

Suppose the investor has chosen portfolio A in Q2 above, but the investor is still worried about the losses that the portfolio may suffer from an upward shift in the term structure of interest rates. (a) Consider duration hedging using 1-year zero coupon bonds. Find the dollar position. (b) Consider duration+convexity hedging using both 1-year and 5-year zero coupon bonds. Find the dollar position on each bond.

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