A market maker wants to delta hedge a long position of $10 million in face value of 20-year bonds with 30- year bonds until he/she finds a buyer of the 20-year bonds. DV01 of the 20-year bond is 0.1184 and DV01 of the 30-year bond is 0.1429. If the 20-year yield is expected to rise 1.1bp for each 1bp increase in the 30- year bond, what should be the position of the 30-year bond for this market maker? A. Short position of $13.28 million B. Long position of 13.28 million C. Short position of 10.97 million D. Short position of 9.11 million E. Short position of 7.53 million
A market maker wants to delta hedge a long position of $10 million in face value of 20-year bonds with 30- year bonds until he/she finds a buyer of the 20-year bonds. DV01 of the 20-year bond is 0.1184 and DV01 of the 30-year bond is 0.1429. If the 20-year yield is expected to rise 1.1bp for each 1bp increase in the 30- year bond, what should be the position of the 30-year bond for this market maker? A. Short position of $13.28 million B. Long position of 13.28 million C. Short position of 10.97 million D. Short position of 9.11 million E. Short position of 7.53 million
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 10P
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