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What is the hedge ratio

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Reference no: EM133016868

Question - A manager wishes to hedge a bond with a par value of $20 millions by selling treasury bond futures. suppose that the standard deviation for the bond to be hedged and the hedging instrument are 0.09 and 0.10 respectively and the correlation between the two is 0.85.

a. What is the hedge ratio?

b. How many treasury bonds future contracts should be sold to hedge the bond of treasuries are trading at $100000?

Reference no: EM133016868

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