✦ LIBER ✦

Hedging performance of GNMA futures under rising and falling interest rates

✍ Scribed by Joanne Hill; Joseph Liro; Thomas Schneeweis

Publisher: John Wiley and Sons
Year: 1983
Tongue: English
Weight: 658 KB
Volume: 3
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.3990030406

No coin nor oath required. For personal study only.

✦ Synopsis

his study is concerned with the effectiveness of GNMA futures as a hedge for T mortgage bankers and other issuers and-holders of mortgage-backed securities. Since the effectiveness of minimum-risk hedge ratios may differ under various financial market conditions, the optimum size of futures positions is analyzed for (1) periods of rising versus falling interest rates, and (2) the effect of the Federal Reserve's policy change in October 1979 toward greater use of monetary aggregates as targets. The results show that minimum-risk hedge ratios differ significantly under rising and falling rate conditions, as well as for pre-and post-October 1979 periods.

'Usually the GNMA yield at issue L 50 basis pointr above that of mortgages in the pool For intermediation the banker keep 44 of these p i n & GNMA 6. The object of hedging is to protect this intermediation revenue.

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