moosegoose
New member
- Jun 18, 2026
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Gents, would appreciate your thoughts on BB (example 4) page 237 of Volume 5.
I understand the mathematical derivation of this whole equtizing cash thing, but am a bit confused on how the actual exposure to equity occurs.
So I get that to gain synthetic exposure, we go long rf bonds plus long futures. In this example the firm has $500m that they want to use to get equity exposure, while maintaining liquidity. But it seems to me that by buying futures contracts, and by buying the bond we are spending double the amount that we have to invest? Or is it that the firm already had $500m sitting around in rf bonds expiring in 6 months?
I.e we purchase c$500m of stock futures, plus invest c$500m in rf bonds
Help on this would be much appreicated. Cheers.
I understand the mathematical derivation of this whole equtizing cash thing, but am a bit confused on how the actual exposure to equity occurs.
So I get that to gain synthetic exposure, we go long rf bonds plus long futures. In this example the firm has $500m that they want to use to get equity exposure, while maintaining liquidity. But it seems to me that by buying futures contracts, and by buying the bond we are spending double the amount that we have to invest? Or is it that the firm already had $500m sitting around in rf bonds expiring in 6 months?
I.e we purchase c$500m of stock futures, plus invest c$500m in rf bonds
Help on this would be much appreicated. Cheers.