Cash & Duration Neutral Butterfly (aka Duration-Hedged Barbell)

By Don Pistulka
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First in a series of butterfly Swaps. I will adjust the list below, as I add more butterfly swaps:

1. Cash & Duration Neutral Butterfly (aka Duration-Hedged Barbell)
2. Fifty-Fifty Butterfly Swap
3. Regression Weighted Butterfly Swap
4. Maturity Weighted Butterfly Swap

This Excel spreadsheet shows how to set up a cash & duration neutral butterfly swap. The nomenclature I use to describe the three securities involved in this swap are “Body” for the middle security, and “Wing #1” and “Wing #2” for the other two:

Some Graphic’s:

 

The formulas for calculating the par value of the two wings is:

Statistics are:


Download: Butterfly

Post Views: 319
Don Pistulka
Don Pistulka

Retired Credit Union CFO - Finance
Background: over 40 years in investments, asset/Liability management, banking, securities trader.
Worked for: California Credit Union, WesCorp, CalFed S&L, Crocker Bank, Carroll McEntee, Federal Home Loan Bank Board (D.C.), Western Asset Management, Security Pacific National Bank.

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