Question
After discuss the concern of your client, you recommend to use Index futures to do the hedge. Please explain to your client what is the
After discuss the concern of your client, you recommend to use Index futures to do the hedge. Please explain to your client what is the logic behind hedging a portfolio with an index futures? or Equivalently, what is the reason for hedging a portfolio with an index futures?
After giving the general idea about the hedge, based on your client's situation, please further to show your client your strategy or your plan. Your strategy needs address, but not limited to, the following questions: (1) when you need to choose a futures contract, what underlyings you need to use? What is the reasoning/consideration behind your choice? (2) Which maturity you need to choose? What is the reasoning/consideration behind your decision? (3) What are the important information you need to collect in order to determine how many contracts you need?
Step by Step Solution
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Step: 1
Hedging a portfolio with index futures involves using these derivatives to offset potential losses in the value of the portfolio due to adverse market movements The logic behind this strategy is to cr...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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