CB 5.

0% T Z CF P(CF) w T*w T^2*w

CB FV 100 0.5 0.9778 2.5 2.4444 0.0236 0.0118 0.0059
n 2 1.0 0.9560 2.5 2.3900 0.023075 0.0231 0.0231
T 10 1.5 0.9347 2.5 2.3368 0.022562 0.0338 0.0508
r 4.5% 2.0 0.9139 2.5 2.2848 0.02206 0.0441 0.0882
dr 0.0% 2.5 0.8936 2.5 2.2340 0.021569 0.0539 0.1348
3.0 0.8737 2.5 2.1843 0.021089 0.0633 0.1898
3.5 0.8543 2.5 2.1357 0.02062 0.0722 0.2526
4.0 0.8353 2.5 2.0882 0.020161 0.0806 0.3226
4.5 0.8167 2.5 2.0417 0.019712 0.0887 0.3992
5.0 0.7985 2.5 1.9963 0.019274 0.0964 0.4818
5.5 0.7808 2.5 1.9519 0.018845 0.1036 0.5701
6.0 0.7634 2.5 1.9084 0.018426 0.1106 0.6633
6.5 0.7464 2.5 1.8660 0.018016 0.1171 0.7612
7.0 0.7298 2.5 1.8245 0.017615 0.1233 0.8631
7.5 0.7136 2.5 1.7839 0.017223 0.1292 0.9688
8.0 0.6977 2.5 1.7442 0.01684 0.1347 1.0778
8.5 0.6822 2.5 1.7054 0.016465 0.1400 1.1896
9.0 0.6670 2.5 1.6674 0.016099 0.1449 1.3040
9.5 0.6521 2.5 1.6303 0.015741 0.1495 1.4206
10.0 0.6376 102.5 65.3569 0.63101 6.3101 63.1010
103.5751 8.0309 73.8682
P D C
in actual
P 103.5751
P new 95.6277
dP/P -7.67%

using duration method

dP/P -8.03%

using convexity & duration method

dP/P -7.66%

103.5751
0.1%
1.0%
2.0%
-0.1%
-1.0%
-2.0%
CB 5.0% duration hedging strategy
CB FV 100 k -1.3045
n 2 position in zcb
T 10
r 4.5%
P 103.5751 performance of duration strategy
D 8.030893 dr 103.5751 63.7628 dV
C 0.1% 102.7471 63.128365 -0.0003 0.1%
1.0% 95.6277 57.694981 -0.0318 1.0%
ZCB FV 100 2.0% 88.37608 52.204578 -0.1210 2.0%
T 10 -0.1% 104.41073 64.403642 -0.0003 -0.1%
P(z) 63.76282 -1.0% 112.28816 70.468809 -0.0350 -1.0%
D(z) 10 -2.0% 121.844 77.880078 -0.1474 -2.0%
C(z)

dr 0.00%
63.76282
CB 5.0% duration & convexity hedging strategy
CB FV 100 831.80 182.79 637.63
n 2 7650.91 365.57 6376.28
T 10
r 4.5% 304083.35 66821.62 233099.30
P 103.5751 1398480.18 66821.62 1165496.50
D 8.030893 -1094396.83 0.00 -932397.20
C 73.8682

ZCB FV 100 k2 -1.1737

T 10 k1 -0.4562
P(z2) 63.76282
D(z2) 10 performance of duration & convexity hedging strategy
C(z2) 100 dr 103.5751 91.3931 63.7628 dV
0.1% 102.7471 91.210514955 63.12836 0.0000
ZCB FV 100 1.0% 95.6277 89.58341353 57.69498 0.0003
T 2 2.0% 88.37608 87.809543092 52.20458 0.0023
P(z1) 91.39312 -0.1% 104.41073 91.576087672 64.40364 0.0000
D(z1) 2 -1.0% 112.28816 93.239381991 70.46881 -0.0003
C(z1) 4 -2.0% 121.844 95.12294245 77.88008 -0.0027

dr 0