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hitthebid
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Posts: 2
Joined: December 8th, 2007, 5:58 pm

Corporate Bond Hedging

July 3rd, 2009, 5:53 pm

I thought this would be relatively straightforward, but I can't seem to find an article online, or a thread on these forums...Assuming I have a portfolio consisting of 100% corporate bonds, each bond has a different benchmark security, I have the following information available:Corporate Bonds:NotionalCurrent Market PricePV01I can probably get more data on these if required, but from this information how do I calculate the correct notional amount of the government security in order to hedge correctly.Ideally I want to Have a +ve PV01 of X for Bond A and then hedge by Selling notional Y of Treasury A with PV01 of -X, but how do I find out Y to sell the correct amount?
 
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hitthebid
Topic Author
Posts: 2
Joined: December 8th, 2007, 5:58 pm

Corporate Bond Hedging

July 10th, 2009, 11:43 pm

Ok guys, clearly from the lack of responses I'm guessing everyone feels this question has been answered elsewhere, but if thats the case I still can't find it!If someone could point me in the right direction that would be much appreciated!
 
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DavidJN
Posts: 270
Joined: July 14th, 2002, 3:00 am

Corporate Bond Hedging

July 11th, 2009, 4:38 pm

Hedge ratio = (PV01 of the bond to be hedged)/(PV01 of the government bond)