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You own a bond portfolio and decide to hedge using futures on 10 year Treasury notes. The bond portfolio has a PVBP = $764.9 and the futures contract has a PVBP = $193.1. What is the hedge ratio need...

You own a bond portfolio and decide to hedge using futures on 10 year Treasury notes. The bond portfolio has a PVBP = $764.9 and the futures contract has a PVBP = $193.1.

What is the hedge ratio needed? Enter your result as a positive number with one decimal place (do not round to the nearest integer).

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Answer #1

Hedge ratio = PVBP of the portfolio to be hedged/ PVBP of the hedge vehicle-futures contract

= 764.9/ 193.1

= 3.96116

=4

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