RT Journal Article
SR Electronic
T1 Duration–Based Hedging with Treasury Bond Futures
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 84
OP 91
DO 10.3905/jfi.1999.319233
VO 9
IS 1
A1 Richard J. Rendleman, Jr
YR 1999
UL https://pm-research.com/content/9/1/84.abstract
AB A survey of derivatives textbooks and other documents shows at east four different treatments of duration-based hedging with Treasury bond futures. Most hedging methods also employ an incorrect definition of futures duration, and, in some cases, apply the accrued interest pricing method incorrectly This article develops an alternative model that is mathematically identical to the most frequently advocated hedging formula and helps to reconcile the various approaches to hedging. It also demonstrates a potential maturity mismatch problem that can represent 10% or more of a typical hedging quantity.