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#asset-swap #finance #gale-using-and-tradning-asset-swaps
selling low-coupon bond and buying the high coupon bond in duration-neutral amounts will l eave us with a steepening exposure in much the same way as if we were to buy an 8- year bond and sell a 10-year bond
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owner: piotr.wasik - Using and Trading Asset Swaps - Giles Gale (Morgan Stanley), p5

bond has a modified duration of 7.955, while the high coupon bond has a modified dur ation of 6.7. If the yield curve steepens, we would expect the yield to rise further on the low coupon bond than on the high coupon bond . Hence <span>selling this bo nd and buying the high coupon bond in duration-neutral amounts will l eave us with a steepening exposure in much the same way as if we were to buy an 8- year bond and sell a 1 0-year bond. The same proble m can arise whe n trading swap spreads on a yield/yield basis beca use the duration of the swap may be different to that o f the bon d. A sw ap maturing on Feb 15



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