悬赏计算过程~~

A trader executes a $420M 5-year pay fixed swap (duration 4.433) with one client and a $385M 10year receive fixed swap (duration 7.581) with another client shortly afterwards. Assuming that the 5-year rate is 4.15% and 10-year rate is 5.38% and that all contracts are transacted at par, how can the trader hedge his net delta position?
A.buy 4227 eurodollar contracts
B.sell 4227 eurodollar contracts
C.buy 7185 eurodollar contracts
D.sell 7185 eurodollar contracts

做题呢？？

是啊   求大师指导 2# jjpzb

When the rate goes down, the price of Eurodollar actually goes up. So, if after aggregating, we have to pay floating rate and receive the fixed, then we actually needs to sell Eurodollar futures.
In other words, when the floating rate goes up, on one hand, we pay more as we have the obligation to pay floating; on the other hand, we receive the profit from shorting the Eurodollar, since the price of Eurodollar tends to go down. Thus, we can hedge the position.
Back to our problem, the total exposure, measured using duration should be
DV01 of the portfolio=($420,000,000*4.433/1.0415-$385,000,000*7.581/1.0538)*0.01%=-98,200.48
Since DV01 of Eurodollar futures is $25, we should trade 98,200/25=3928 contracts
And the direction: remember that we have more floating payments than fixed, for the 10 years swap is receiving fixed while paying floating. So we need to short the Eurodollar contracts.
The closest answer would be B.  
Am I right?^^

pepinliu 发表于 2013-11-15 23:37
When the rate goes down, the price of Eurodollar actually goes up. So, if after aggregating, we have ...

NO,your anser is wrong.

  First we should konw that this is a duration hedging questions.
  A*durationa+ERODILLAR *(duration=0.25)=B*duration
385*7.581 -420*4.433=2918.685-1861.86=1056.825/0.25=4227.3
ERODILLAR futures are 0.25 year.zoro coupen ,its duration is 0.25,that is the key