Business, 04.05.2021 02:10 choatefarmsus

3. Consider three zero coupon bonds of maturities 1, 5 and 20 years. A trader constructed a butterfly portfolio using the three zeros, which has zero market value and Macaulay durations for the long and short positions matched. Determine the composition of the butterfly and explain under what circumstances will the trader have a loss.

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3. Consider three zero coupon bonds of maturities 1, 5 and 20 years. A trader constructed a butterfl...

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