Confused on Topic Test Lehigh #2

On question 2, why is Swap C chosen to adjust the bond duration? There isn’t much rationale given. Anyone have any insight?

was swap C the one with the highest duration? If so - a higher duration swap reduces the size of the NP and also gives you an added benefit that if this swap were used for a multiple rolling period – you roll the swap over multiple times – the # of times you need to rollover this swap would be smaller.

When lowering duration of bond portfolio, choosing the lowest (in this case, highest negative) duration swap will provide the most efficient strategy, because, as CPK said above, the size of NP is reduced.

Thanks y’all!

Dude your last post was 7 months ago. Where have you been? How is your study progress, where are your notes? :grin:

if the case is all Duration positive, should we choose also the lowest?

you should choose the swap that will produce the lowest notional principal

ok thanks Kevin