Standard bank has assets of $ 150 million, liabilities of $ 135 million and equity of $ 15 million. It asset duration is six years and the duration of the liabilities is for four years. Standards bank wishes to hedge the balance sheet with 20-year T-bond futures contracts, witch are currently trading at $95 per $100 face value and duration of 10.37 year. Note that T-bond futures are sold in $100000 face value per contract. What is the duration gap of Standard Bank?

Standard bank has assets of $ 150 million, liabilities of $ 135 million and equity of $ 15 million. It asset duration is six years and the duration of the liabilities is for four years. Standards bank wishes to hedge the balance sheet with 20-year T-bond futures contracts, witch are currently trading at $95 per $100 face value and duration of 10.37 year. Note that T-bond futures are sold in $100000 face value per contract. What is the duration gap of Standard Bank?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 5P

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