# Hedging treasury bond with Eurodollar futures

I was reading Interest Rates Markets by Jha, and on p. 214, he describes hedging a 5 year treasury bond with a ED future strip, as described below.

He says the best hedging quantity can be generated with Bloomberg, but I am curious to know more about how to calculate this. I have seen this done with approximations and with bundles (as described below as an approximation), but I would like to understand the ideal methodology.

Take a 5Y bond, say buying \$10 million dollar notional and calculate the PV01 using you favourite method for calculating bond risks, e.g. some duration formula. Lets say this Pv01 is \$4,500
Now look at the ED strip. Each 3-month contract has a pv01 of \$25 by definition of the instrument. If you purchase 1 each of every contract for 5y then you will have purchased 20 different contracts and your dv01 will be \$25 x 20 = \$500. How many times do you need to do this to hedge your \$4,500 exposure? 9.
Therefore using simplistic hedge ratios based just on $$DV01$$ can be dangerous depending on what you are actually trading. For example if you were asked to provide a quote on a spread between the bond a a eurodollar strip that happens to be $$DV01$$ neutral you might work under the very wrong assumption that such a package is riskless.