How many contracts are necessary to fully hedge

Reference no: EM131936918

Question: Assume that Guyton wishes to hedge its net worth position with T-bond futures (20-year maturity, 8% coupon) and that the current price of the underlying T-bond is $82, 841 on face of $100,000. The annualized market yield is therefore 10.00%, and the duration for these bonds is 9.3854. How many contracts are necessary to fully hedge Guyton assuming that yield changes in the spot and futures markets are equivalent?

Reference no: EM131936918

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