Finance Junkie
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Joined: Mon Feb 04, 2013 3:35 pm


Postby » Tue Apr 23, 2013 12:01 am

How will the value of a portfolio of non-callable corporate bonds hedged with Treasury futures change if the yield curve shifts up in a parallel manner by an anticipated amount? The value of the newly hedged portfolio:

A) may increase or decrease.
B) increases.
C) stays the same.
D) decreases.

source Schweser
AS YTM increases value of portfolio decreases so the ans should be D but the ans is C
Can u please explain this question

Good Student
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Joined: Mon Apr 08, 2013 1:36 pm


Postby vnraghuveer » Tue Apr 23, 2013 10:59 am

Here hedging the corporate bond portfolio exposure with treasury futures will offset the gains/losses due to yield curve shifts. So option C

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