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- 2014-8-7
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This pertains to scenario for a floating rate payer who wants to hedge the risk but has no view on which direction interest rate will go in future. If its going up the position will result in losses.
Short on futures will result in fixed payments where ever interest rate goes. If goes up loss on the underlying position is compensated by profit on futures and if goes down profit on the underlying position is compensated by loss on futures.. |
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