Duration based Hedging

sreyassen
Posts: 1
Joined: Tue Aug 21, 2012 8:46 am

Duration based Hedging

Postby sreyassen » Mon Oct 29, 2012 7:56 pm

Hi
Could someone please help and explain how I should decide to long/ short Futures based on change in expected interest rate?
Suddenly I am unable to work out the relation! :shock:
Many Thanks.

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shreyas
Finance Junkie
Posts: 83
Joined: Thu Jul 19, 2012 6:49 pm

Re: Duration based Hedging

Postby shreyas » Tue Oct 30, 2012 1:50 am

In duration based hedging you are using bonds futures to hedge. Bond price move inversely to interest rates, so if you expect the interest to go up, you will short the bond futures contract to hedge and long in-case if you expect the interest rates to go down.


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