Question

You own Bond B and are concerned about interest rates increasing soon. You have chosen Bond H to hedge your B risk. The greater H's dv01:__________.a) the more of it you need to buyb) the more of it you need to sell shortc) the less of it you need to buyd) the less of it you need to sell short

Answer 1

The greater H's dv01:__________

c) the less of it you need to buy.

Step-by-step explanation:

The dollar (or money) duration or DV01 is the dollar value per 01 (100 basis points) of a bond. It measures a bond’s interest rate risk in nominal or dollar-amount terms. Dollar (money) duration assumes that bonds have fixed rates with fixed interval payments. It is a linear approximation of how a bond's value will change in response to changes in interest rates.