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Design a hedge

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It is February 15 and a company expects to borrow 20 crore for 3 month on April 15. The spot three-month interest rates is 12 p.a., the June three-month rupee futures price is 88, the coefficient of correlation between three-months interest rate changes and changes in the prices of futures maturing 2 months later is 0.95, the standard deviation of spot 3- month interest rate changes is 2, whereas the standard deviation of 3-month interest rate futures prices is 2.5 (for futures maturing in 2 months' time). Design a hedge. What of possible hedge imperfections present? are sources

Reference no: EM133069568

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