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A company has a $10 million portfolio with beta of 1.2. How can it buy the S&P500 futures contract (with a multiplier of 500) to
A company has a $10 million portfolio with beta of 1.2. How can it buy the S&P500 futures contract (with a multiplier of 500) to create an optimal hedge against a stock decline and what is the hedged return? Futures index is 1000
- Short 24 S&P500 futures contracts for a return of 0% while edged
- Short 24 S&P500 futures contracts for a risk-free return while hedged
Please explain why.
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