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Dear John,
While calculating the No. of contracts, we used duration 5 Months further divided by 3 Months, could i understand this duration of future – 3 months is fixed for all cases?
Please correct me if my statement is wrong.
Great Thanks!
They are always 3 month futures and therefore the interest calculation is only ever for 3 months. If we want to hedge against interest over 5 months we need to deal in 5/3 multiplied by the amount of the loan or deposit.
All of this is explained in great detail in my free lectures on interest rate risk management.
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