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3. Futures price of S&P 500 is 1,200; One contract is on $250 times the index Size of portfolio is $5 million; Beta of portfolio
3. Futures price of S&P 500 is 1,200; One contract is on $250 times the index
Size of portfolio is $5 million; Beta of portfolio is 1.3
a) What position (Long or Short and #contracts) in futures contracts on the S&P 500 is necessary to hedge the portfolio?
b) If the portfolio manager decides to reduce risk / beta of the portfolio to 0.5 What position will you have?
c) Why to portfolio managers do Not hedge for a scenario when the stock prices go up for the portfolio.
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