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How many contracts should the manager trade to hedge

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A portfolio manager has a bond portfolio of $20 million. The duration of the portfolio is 6.7 years. The front-month T-bond futures price is currently at 107-15. The cheapest-to-deliver bond has a duration of 7 years. How many contracts (long or short) should the manager trade to hedge the portfolio risk against changes in interest rates?

Reference no: EM133016846

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