Formulate a strategy to cover

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Portfolio duration of assets and liabilities. 

Assets

Liabilities

A=$7,450

L= $6,550

E= $900

TA=$7,450

TL+ E= $7450

The average duration of assets is 5 years, while the average duration of liabilities is 1 year. The current interest rate is 

Duration gap 

DA=  (600) +(500*2)+ (750*5)+ (1,000*10) / 2,850= 5.38 years

DL= (425) + (400) + (1*750) + (5*1950) /4,425- 900=3.21 years

DGAP= 5.38 - 2850/4425 *3.21 = 3.31 years

  1. Following the analysis in part II above, formulate a strategy to cover any decline in net worth using futures. 

Reference no: EM133068080

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