TY - JOUR T1 - Hedging and Replication of Fixed-Income Portfolios JF - The Journal of Fixed Income SP - 43 LP - 63 DO - 10.3905/jfi.2002.319311 VL - 11 IS - 4 AU - Lev Dynkin AU - Jay Hyman AU - Peter Lindner Y1 - 2002/03/31 UR - https://pm-research.com/content/11/4/43.abstract N2 - 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. ER -