Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1- Suppose you have 10,000 shares of the SPY. It is early October and the prices of the SPY and the December e-mini S&P500 futures

1- Suppose you have 10,000 shares of the SPY. It is early October and the prices of the SPY and the December e-mini S&P500 futures contract are shown below. Based on the spot-future b estimate (shown below), calculate the number of e-mini S&P 500 futures contracts you need to hedge your portfolio.

(SPY = 111.85 and /ESZ9 = 1122 bs,FC = 0.98, Z = 20)

2- Suppose now it is 35 DTM and the risk free rate has stayed constant at 1.48% since you initiated the hedge in October. The SPY are currently priced at 102.5. If the change in the basis is only due to time decay, what is the profit/loss on the un-hedged SPY position and on the hedged position?

(I need the answer of the second question)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance And Control For Construction

Authors: Chris March

1st Edition

0415371155, 978-0415371155

More Books

Students also viewed these Finance questions

Question

a. Describe the encounter. What made it intercultural?

Answered: 1 week ago