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

Question

Quizplus · Accepted Answer

By using a short hedge in T-bond futures, the pension fund can lock in the current interest rates and protect against potential losses if interest rates were to rise. This would be an effective risk management strategy for the fund.

A Pension Fund Holds $10 Million in Treasury Bonds