I could not make sense of this question: Had to rebalance the portfolio with Treasury futures (with duration 7.5) while leaving the beta and duration unchanged. Any time you add Treasury futures to a portfolio which has a different duration, the duration of the new portfolio will be different from the old portfolio! NC
I got this one correctly ~! quite tricky and was not in any of the practices… the answer is B
Portfolio was changed. nearly 88 million was added as new amount in the portfolio.
i don’t even remember this question…lol
monki, I think it was A, you need to divide the answer by the exchange rate, ie 1.05
can someone tell me if yield beta had to be multiplied and wat was the answer in numbers pls
Me neither…
it was a long calculation … ya i think it is A… if i use 88/1.05 / (price of future) i got 7xx contract (answer C), but the duration would have changed, so we “rebalance” again, to make the duration back to 5.8… so (5.8-7.14)/(duration of future) * (88/1.05) / (price of future)… to get -16x… so 7xx - 16x… = answer A… tricky question… maybe a easier way to do this??
There were two questions in a row that required division by 1.05 (the CHF to USD exchange rate). The answers were A, then B (because I remember changing them from B and C).
bosjcm Wrote: ------------------------------------------------------- > There were two questions in a row that required > division by 1.05 (the CHF to USD exchange rate). > The answers were A, then B (because I remember > changing them from B and C). Actually you had to multiply by 1.05 because the futures price was in USD 100kUSD x 1.05 CHF/USD = 105k CHF
what?? I converted the CHF to dollar instead and found everything in dollars…dont tell me this approach was wrong and i would get a different answer by converting $ to CHF!
The funds are in CHF but the derivatives are priced in USD. I think you will arrive the same answer if you convert the funds to USD or convert the derivatives to CHF
The derivative contract was in US dollar in the NSP and Nasdaq< so I conver to US
The 8 month annualized risk free rate was given as 2.93%. Was that needed to be used in any question?
warren1281 Wrote: ------------------------------------------------------- > The 8 month annualized risk free rate was given as > 2.93%. Was that needed to be used in any question? yes, when you were equitizing cash.
ok, great. Do you happen to remember the answer for that question?
nevcfa1 Wrote: ------------------------------------------------------- > I could not make sense of this question: > > Had to rebalance the portfolio with Treasury > futures (with duration 7.5) while leaving the beta > and duration unchanged. > > Any time you add Treasury futures to a portfolio > which has a different duration, the duration of > the new portfolio will be different from the old > portfolio! > > NC I was confused by this at first- but the key is that they are not talking about DD, just duration. Meaning if your current 10mm in FI had duration for 6 and you add an additional 40mm of 6 duration bonds your FI port will still be at 6- no change. The DOLLAR DURATION will change- but not the DD. For the calc you just had to go long the .5*assets-current FI and set target to whatever it was. (don’t remember exact details)