Asked by
Alissa Dunlap
on Dec 08, 2024
Verified
Assume newly-issued 30-year on-the-run bonds sell at higher yields (lower prices) than 29½-year bonds with a nearly identical duration. A hedge fund that sells 29½-year bonds and buys 30-year bonds is taking a
A) market neutral position.
B) conservative position.
C) bullish position.
D) bearish position.
Nearly Identical Duration
A characteristic of two or more financial instruments whose cash flows match or are very close in terms of their time structure, minimizing interest rate risk.
Bullish Position
An investment strategy where an investor believes that a particular asset's price will rise.
- Recognize and distinguish among diverse hedge fund tactics such as market neutral, directional, and arbitrage strategies.
- Understand the techniques used by hedge funds to mitigate risks and amplify investments.
Verified Answer
JP
Learning Objectives
- Recognize and distinguish among diverse hedge fund tactics such as market neutral, directional, and arbitrage strategies.
- Understand the techniques used by hedge funds to mitigate risks and amplify investments.