a. Marshall Arts has just invested one million euros in BTPs (long-term Italian government bonds). Marshall is concerned about increasing volatility in interest rates. He decides to hedge using bond futures contracts. Should he buy or sell such contracts?
b. The treasurer of an Italian corporation plans to issue bonds in three months. She is also concerned about interest rate volatility and wants to lock in the price at which her company could sell 5 percent coupon bonds. How would she use bond futures contracts to hedge?