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If all spot interest rates are increased by one basis point, a value of a portfolio of swaps will increase by $1000. For hedging the portfolio，how many Eurodollar futures contracts are needed？

• 40
• 22
• 11

D. 1100

Answer: A

Eurodollar futures contracts are constructed so that the DV01 is always equal to $25 per contract. Therefore, we need 1000/25= 40 contracts.