Hi all, I have been reviewing CFAI practice exam and a bit stuck on a concept.
Let’s say we are buying futures when and selling futures in the below situation.
(1) buying futures
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int rate rise : price declines so we need to over-hedge to get protection
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int rate fall : price increases so we need to under-hedge to gain exposure of falling int rate
(2) selling futures
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int rate rise : price declines so we under-hedge to gain exposure
-
int rate fall : price increases so we need to over-hedge to get protection
Is my understanding correct?