Question
A company has a $10 million portfolio with a beta of 1.3. It would like to use futures contracts on the S&P 500 to hedge
A company has a $10 million portfolio with a beta of 1.3. It would like to use futures contracts on the S&P 500 to hedge its risk. The index futures is currently standing at 1080, and each contract is for delivery of $250 times the index.
What is the hedge that minimizes risk?
What should the company do if it wants to reduce the beta of the portfolio to 0.8?
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Handbook Of Recent Advances In Commodity And Financial Modeling
Authors: Giorgio Consigli, Silvana Stefani, Giovanni Zambruno
1st Edition
3319613189, 978-3319613185
