Therefore, when using interest rate futures to hedge fixed-income bonds, the relationship between the spot value of fixed-income bonds and the value of required interest rate futures contracts is not 65,438+0: 65,438+0. In order to avoid the interest rate risk of different types of bonds, the interest rate futures market needs future positions with different denominations.
Moreover, the existence of basis risk will greatly affect the hedging effect. Using the concept of hedging ratio, hedgers can minimize the impact of basis risk.
The purpose of hedging with interest rate futures is to reduce the impact of interest rate changes on the asset prices of fixed-income bonds and reduce interest rate risks. Therefore, under complete hedging, the loss of spot position price fluctuation should be offset by future positions's profit, namely:
Hedged bond price fluctuation = futures contract price fluctuation × hedging ratio;
From this, the calculation formula of hedging ratio can be obtained: hedging ratio = price fluctuation of hedged bonds/price fluctuation of futures contracts;
Therefore, the hedging ratio should be equal to the ratio of the change degree of spot price to the change degree of futures target price. If the fluctuation of the hedged bond is greater than that of the futures contract used for hedging, then the hedging ratio should be greater than 1.
For example, suppose that the underlying bond of a long-term treasury bond futures contract is a 7-year virtual treasury bond, and that of coupon rate is 3%. If the coupon rate of the bond we hold is 2.5% and the maturity is 10 year, then compared with the treasury bond futures contract, the coupon rate of the bond is higher and the maturity is longer. Therefore, the bond price is more affected by the change of interest rate, and the hedging ratio should be greater than 1, that is, a small number of treasury bond futures contracts can be used for hedging. If the volatility of the bond price is twice that of the futures target, then each unit of spot bond needs twice the amount of treasury bond futures contracts to preserve its value.
Tips: The above instructions are for reference only and do not make any suggestions. If you need to solve specific problems (especially in the fields of law, accounting and medicine), I suggest you consult professionals in related fields in detail.
Response time: 2021-10-14. Please refer to the latest business changes announced by Ping An Bank in official website.
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