Not sure why this is considered difficult. Am I missing something? If we have to hedge a MBS then we just apply that 2 equations and 2 unknowns concept. Anything else?
was going to ask the same ? as slash
cousin avi Wrote: ------------------------------------------------------- > dkitty Wrote: > -------------------------------------------------- > ----- > > bobsters Wrote: > > > -------------------------------------------------- > > > ----- > > > 2 bond hedge: do both of these: > > > > > > 1. short a long maturity treasury bond > > > 2. long a short maturity treasury bond. > > > > > > no calculations needed according to schweser. > > > > you meant short 2 treasury bond right? > > > I agree w/bobsters, hedge with a short position in > both the 2-year and 10-year Treasury security Every situation will be different…you may need to go long and short. CFAI hits this topic in detail - everyone should read this section and know those calculations. Schweser dunced this one up with the lack of detail.
cfafa Wrote: ------------------------------------------------------- > was going to ask the same ? as slash Me 3!
Apparently the calc for a 2-bond hedge is not a LOS in this year. They took it out.