When finding the Notional Principal of a swap to modify duration of the fixed-income allocation we are normally given 2 or 3 different swap maturities and durations.
Which one are we supposed to pick up and for what reason? I’ve just done the following question in CFAI on-line topics:
20 million $ portfolio, duration is 5, and desired allocation is 3
#1 Maturity of 2 years, duration -2.125
#2 Maturity of 3 years, duration -3.375
#3 Maturity of 3.5 years, duration -3.625
To find NP I did (3-5)/-3.375 because -3.375 but right answer is -3.625 (duration of #3)