I never heard of the rule of the 2% in this case. Could some one tell me what is about? The number of futures contracts needed to fully remove the duration gap between the asset and liability portfolios is given byNf=BPVL−BPVABPVf," id=“MathJax-Element-6-Frame” role=“presentation” style=“position: relative;” tabindex=“0”>f=BPVL−BPVABPVf where BPV is basis point value (of the liability portfolio, asset portfolio, and futures contract, respectively). In this case, Nf=299,860−243,376102.30=+552.1," id=“MathJax-Element-7-Frame” role=“presentation” style=“position: relative;” tabindex=“0”>Nf=299,860−243,376102.30=+552.1, where the plus sign indicates a long position in or buying 552 futures contracts. Because the value of assets is more than 2% greater than the value of liabilities (217.3/206.8 − 1 = 5.1%) and Puhuyesva believes interest rates will fall, the duration of assets should be greater than the duration of liabilities so that the surplus will rise if interest rates do fall. Therefore, more than 552 contracts should be bought.
2% rule? This is beyond the curriculum.what provider came up with that. This looks like a typical contingent immunization over/under hedge Question. Keep it simple
No idea what that is