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2. (15pts) Consider an ETF VOO that tracks the S&P500 index perfectly. Suppose the market portfolio is represented by the S&P500 index. (1) (3pts) What
2. (15pts) Consider an ETF VOO that tracks the S&P500 index perfectly. Suppose the market portfolio is represented by the S&P500 index. (1) (3pts) What is the of VOO? (2) (5pts) Suppose we would like to have a portfolio with = 1.5. Can you construct such a portfolio using VOO and another asset? You need to think about what the other asset should be. (3) (2pts) Will you short the portfolio in a bull market or a bear market? (4) (5pts) Suppose you short the portfolio in (2) worth of 10 million USD. How do you use S&P500 index futures to hedge the risk? Suppose the current futures price is 2000 and each contract value is 250 times the index futures price
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