Dear all,
For the purpose of calculating the market risk, the following is required:
A forward commitment to buy a debt instrument shall be treated as a combination of a borrowing maturing on the delivery date and a long (spot) position in the debt instrument itself.
Let us I am going to buy a British petroleum bond in 3 months with a residual maturity of 9.7 yrs from the date of the borrowing:
Then does it mean that I have one long position from today until 10yrs (residual maturity of the bonds 10 yrs from today)
Another long position in from now (spot) to the expiry of the forward (3 months)
Kindly help me understand.