A bank with total assets of $271 million and equity of $31 million has a leverage adjusted duration gap of +0.21 years. Use the following quotation from the Wall Street Journal to construct an at-the-money futures option hedge of the bank's duration gap position. If 91-day Treasury bill rates increase from 3.75 percent to 4.75 percent, what will be the profit/loss per contract on the bank's futures option hedge?

Question

A bank with total assets of $271 million and equity of $31 million has a leverage adjusted duration gap of +0.21 years. Use the following quotation from the Wall Street Journal to construct an at-the-money futures option hedge of the bank's duration gap position.  If 91-day Treasury bill rates increase from 3.75 percent to 4.75 percent, what will be the profit/loss per contract on the bank's futures option hedge?

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The Answer of A bank with total assets of $271 million and equity of $31 million has a leverage adjusted duration gap of +0.21 years. Use the following quotation from the Wall Street Journal to construct an at-the-money futures option hedge of the bank's duration gap position.  If 91-day Treasury bill rates increase from 3.75 percent to 4.75 percent, what will be the profit/loss per contract on the bank's futures option hedge?

A Bank with Total Assets of $271 Million and Equity