2) A trader finds shares of company A and B are out of their expected relative pricing pattern. Shares of A are under-priced while shares of B are over priced. The trader decided to use futures on A and B to set up a pair trading position: II = NV-NV2 +N,V, NA. NB: N; are the number of future contracts on A, B and market index, VA VB. Vi are the value of the future contracts. Nj is chosen to hedge out the residual beta of the long- short position so that II is market neutral. Currently VA = 100, VB = 50, Vi= 1250. The trader longs 1000 future contracts on A while shorting 2000 futures on B. BA=0.8B3 1.1. What should the trader's position in N; be? = 2) A trader finds shares of company A and B are out of their expected relative pricing pattern. Shares of A are under-priced while shares of B are over priced. The trader decided to use futures on A and B to set up a pair trading position: II = NV-NV2 +N,V, NA. NB: N; are the number of future contracts on A, B and market index, VA VB. Vi are the value of the future contracts. Nj is chosen to hedge out the residual beta of the long- short position so that II is market neutral. Currently VA = 100, VB = 50, Vi= 1250. The trader longs 1000 future contracts on A while shorting 2000 futures on B. BA=0.8B3 1.1. What should the trader's position in N; be? =