If a corporate treasurer wants to hedge against interest rate increases on a new bond issue to be floated, he can sell short in the futures market.

Question

Quizplus · Accepted Answer

The treasurer could hedge his or her position in the futures market by selling a Treasury bond or other similar security short. If interest rates go up, the price to buy back the interest rate futures will be lower, and a profit will be made on the short position.

If a Corporate Treasurer Wants to Hedge Against Interest Rate