PT  - JOURNAL ARTICLE
AU  - Lev Dynkin
AU  - Jay Hyman
AU  - Peter Lindner
TI  - Hedging and Replication of Fixed-Income Portfolios
AID  - 10.3905/jfi.2002.319311
DP  - 2002 Mar 31
TA  - The Journal of Fixed Income
PG  - 43--63
VI  - 11
IP  - 4
4099  - https://pm-research.com/content/11/4/43.short
4100  - https://pm-research.com/content/11/4/43.full
AB  - This article discusses hedging and replication strategies based on Eurodollar futures, Treasury futures, and swaps for diversified fixed-income portfolios. Analytical and empirical hedge ratio approaches are empirically tested on a variety of fixed-income indexes. Tracking errors are found to have significantly increased since the middle of 1998. The optimal replication portfolios are generally found to be hybrid portfolios consisting of a combination of Treasury futures and Eurodollar futures and swaps at a long-term cost of between 4 and 12 basis points.