Design strategy using swaps that enable to achieve objective

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Reference no: EM131323432

An asset management firm has a $300 million portfolio consisting of all stock. It would like to divest 10 percent of its stock and invest in bonds. It considers the possibility of synthetically selling some stock using equity swaps.

It does not, however, want to receive a fixed or floating rate. If it actually sold the stock, it would invest in a broadly diversified portfolio of bonds.

In fact, there are bond indices that are quite representative of the universe of bonds in which it would invest. Design a strategy using swaps that would enable it to achieve its objective.

Reference no: EM131323432

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