Should the bank generally be long or short in derivatives, Financial Management

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Should the bank generally be long or short in derivatives

1. Wells Fargo owns $2 million in 10-year Treasury bonds. It hedges the interest-rate risk by “shorting” 10-year Treasury bonds using futures contracts. If each futures contract is worth $100,000, how many must Wells Fargo sell to completely hedge the risk?

2. Should the bank generally be long or short in derivatives markets to hedge the interest-rate risk of their entire portfolio?

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Financial Management: Should the bank generally be long or short in derivatives

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