Solution-Calculate the p-l of the unhedged and hedge

Calculate the p-l of the unhedged and hedge portfolios

Reference no: EM132455667

Problem: The following OATs are available as hedging instruments:

OAT	Coupon rate	Maturity	clean price
15	3.75%	25/10/2019	114.77
16	3.25%	25/10/2021	118.11
17	5.5%	25/04/20209	153.11

These prices were obtained as of March 15, 2016. As a fixed income manager, you hold a portfolio that is long the following 10 bonds:

OAT	COUPON RATE %	MATURITY	CLEAN PRICE	YTM
1	4,25	25-oct-17	107,53	-0,39500%
2	4	25-avr-18	109,24	-0,3510%
3	4,25	25-avr-19	114,2	-0,2860%
4	3,5	25-avr-20	115,29	-0,1990%
5	3,25	25-oct-21	118,48	-0,0390%
6	8,25	25-avr-22	150,36	0,0080%
7	4,25	25-oct-23	130,56	0,2000%
8	3,5	25-avr-26	128,3	0,6060%
9	5,75	25-Apr-32	169,8	1,1210%
10	4,75	25-Apr-35	158,57	1,2770%

Use the YTM and any of the hedging instruments above to form a portfolio that is insensitive to a small parallel shift in the yield curve. Calculate the P/L of the unhedged and hedge portfolios if dy = 0.1% and dy = 2%

Reference no: EM132455667

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Calculate the p-l of the unhedged and hedge portfolios

Reference no: EM132455667

Reference no: EM132455667

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