Sign up  |  Log in

smaller 90% hedge to improve performance

Schweser Book3, FI Portfolio Management Topic Assessment, question 6 (the last on). I don’t understand the explanation, why using a lower 90% hedge, thus buy less futures contracts, improves performance by leaving BPVA lower, if interest rates are expected to rise?

I cannot include any more specific details because it will be deleted by overzealous moderators.

With exam day right around the corner, Schweser's Final Review products are designed to help you finish out your study plan and walk into the testing center feeling prepared and confident.

If you are lowering BPVA, I assume your intent is lowering duration, which performs better than a higher duration when interest rates rise… Cant really tell exactly without the full q.

Be careful if the question has a short position on the future contract or a long position.

Thank you