
Interest Rate Futures 195
R E V I E W Q U E S T I O N S
1. How does interest rate risk a ect any organization?
2. What is meant by duration? How can duration help in estimat-
ing the price changes in the bond?
3. If you expect that the interest rate is going to change, you can
adjust the bond duration of the portfolio to minimize the risk
of interest rate change. If the interest rates are expected to
increase, how would you adjust the bond duration of the
portfolio?
4. Explain the concepts of a cheapest-to-deliver bond and conver-
sion factor in relation to the bond futures traded on the NSE.
P R O B L E M S
1.