Calculate each bond s market price, duration, modified duration, and convexity. They will receive delivery on August 1. The Lamottas are anxious to protect themselves from interest rate risk. They have decided to buy some futures contracts. The following are the prices for sterling short term interest rate futures on March 1.
Contracts expire mid-month.
The Lamottas have another potential exposure period that will last to next January. They have been told the strategy that could be put in place for that exposure is at risk from twists in the yield curve. The Lamottas have a contingent exposure.