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Derivatives and Risk Management, 1st Edition
book

Derivatives and Risk Management, 1st Edition

by Sundaram Janakiramanan
May 2024
Intermediate to advanced content levelIntermediate to advanced
542 pages
27h 26m
English
Pearson India
Content preview from Derivatives and Risk Management, 1st Edition
Interest Rate Futures 175
Assume that the interest rate increases by 100 basis points for the company and yield on the
GOI securities increases by 80 basis points. is causes the futures price to decrease to INR 92.38 on
September 30.
When the yield to maturity increases to 11%, the bond can be issued at INR 94.02. us,
Loss from the issue of bond = 10,000,000 – 94.02 × 1,000,000
= INR 5.98 million
Gain from futures = 500 × 2,000 × (97.52 – 92.38)
= INR 5.14 million.
Net loss = INR 5,980,000 – INR 5,140,000
= INR 0.84 million
rough hedging, the loss is reduced from INR 5.98 million to INR 0.84 million.
Note that a perfect hedge is not achievable ...
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Publisher Resources

ISBN: 9781299447547Publisher Website