Question 31

A bond analyst works for a large hedge fund that engages in fixed-income strategies. His objective is to form a portfolio that combines owning a basket of bonds and futures contracts, such that he is immune to price risk relative to small movements in interest rate levels. His portfolio has a value of $225 million, with a portfolio-level duration of 6.752. The analyst has located a futures contract with a duration of 7.15 and a value of $104,389. Which of the following strategies should he deploy?