A pension fund holds $10 million in T-bonds. In order to protect against a rise in interest rate, the pension fund should use a short hedge in T-bond futures.

Name: A pension fund holds $10 million in T-bonds. In order to protect against a rise in interest rate, the pension fund should use a short hedge in T-bond futures.
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Question

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A short hedge involves selling futures contracts to protect against a potential decline in the value of an asset, such as T-bonds, due to rising interest rates.

A Pension Fund Holds $10 Million in T-Bonds