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  1. R

    Eurodollar futures and duration based hedges

    Thanks much for the detailed explanation, that makes clear.
  2. R

    Eurodollar futures and duration based hedges

    Hello, Can you explain how did the solution below arrived to short the contracts. I was thinking other way round ie., long the contracts and couldn't get it whether it should be long / short. Question: 173.2. A portfolio manager wants to hedge her bond portfolio this is worth $30 million and...
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    Continuous compounding for T.Bill

    I suppose, I managed to get the reasoning (was bit too fast to post to forum) That is due to the price delta change from face value. 100 - 95.50 / 95.50 which gives the discrete frequency. Converting back to continuos by log and number of days, it gives the right one.
  4. R

    Continuous compounding for T.Bill

    Hello, My question is regarding below: The Quoted Price of a 180-day Treasury bill is 9.00. What is the True Yield (a.k.a., effective return) to the investor under an actual/365 basis (ACT/365) with continuous compounding? Solution: Cash Price (Y) = 100 - P * n/360 = 100 - 9.00 * 180/360 =...
  5. R

    Par yield from Spot Rates.

    Thank you, Jayanthi.
  6. R

    Par yield from Spot Rates.

    Hello This is in regards to explanation on Hull 04.13 question on the par yield calculation from sets of upward sloping spot rates. Suppose that the 6-month, 12-month, 18-month, and 24-month zero rates are 5.0%, 6.0%, 6.5%, and 7.0%, respectively. What is the 2-year par yield? Answer was...
  7. R

    Valuation of binomial two step pricing model

    I suppose, by weighted average means, discounted factor * ( Probability of up * Volatility of Stock Up (Su) + probability of down * volatility of Stock down (Sd)). This gets the solution correct. Got this finally.
  8. R

    Valuation of binomial two step pricing model

    Hi- I am trying to understand the answer for this problem: The current price of a stock is $30. In each of two time steps, where each time step is three months, the stock may go up by 8% or down by 8%. For example, the stock might go up twice in a row to realize a price of $30*1.08*1.08 =...
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