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Hedging strategies, even on the same underlying asset, can vary. It’s nearly impossible to say what exactly your company is doing to hedge something as general as an F.I. portfolio. For instance, they may sell futures on a bond index with a similar duration, or they may hedge using derivatives tied to rates themselves. They can duration match or key-rate ...


I got an alert from Kona that someone viewed Kona coming from this question ... so, I am taking the opportunity to add two thoughts. Duration is the present value weighted timing of all future cash flows from a bond. So, (as @Heilin states in "his" comment) it can be used to get an APPROXIMATE return. However, the first algorithm calculates the ACTUAL ...

0 This paper may be helpful. Generally, this is not a simple problem.

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