Explanation:
Since the fund manager is long the portfolio, the appropriate strategy is to short the futures. . Rounding up to the next whole number means that the fund manager should short 809 futures contracts.
(Book 3, Module 45.3, LO 45.h)
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Question 13
A fund manager holds a $75 million portfolio with a duration of nine and a one-year hedging horizon. There is an appropriate one-year futures contract quoted at 104.40625 with a duration of eight and a contract size of $100,000. Which of the following actions should the fund manager undertake to provide an appropriate hedge for small changes in yield?
A
Short 639 futures contracts.
B
Long 639 futures contracts.
C
Short 809 futures contracts.
D
Long 809 futures contracts.
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