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I am sorry if this is an obvious question, but I am unsure whether the lock-in rate is multiplied by the contract size or the actual amount of the loan itself we wish to hedge against?
In future you must ask in the Ask the Tutor forum if you want me to answer – this forum is for students to help each other.
We apply the lock-in rate to the total amount of the futures that are being dealt in i.e. the number of contracts multiplied by the contract size.
I do explain this, with examples, in my free lectures on foreign exchange risk and on interest rate risk.
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