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answer highlighted, unsure how to work it out Consider an index fund manager who has an equities portfolio valued at 100,000,000 British pounds. The portfolio
answer highlighted, unsure how to work it out
Consider an index fund manager who has an equities portfolio valued at 100,000,000 British pounds. The portfolio is exclusively invested in the British equities market and tracks the FTSE100 index. The manager seeks to hedge the portfolio from October 17, 2014 to November 17, 2014 (a 1 month horizon) using the December, 2014 FTSE100 futures contract. You are provided with the following details - FTSE100 index as at October 17, 2014=5190 - FTSE100 index futures as at October 17,2014=5250. - Each contract point is worth 10 British pounds - Portfolio value as at October 17, 2014=100,000,000 British pounds - Beta of the portfolio =1 - Correlation between the FTSE100 returns and FTSE100 futures returns =0.95 - FTSE100 futures return standard deviation =1.05 - FTSE100 index return standard deviation =1.00 The return of the underlying spot position as at November 17, 2014 (excluding the futures gain or loss) is equal to (to 2 decimal places) None of these answers 3.26% 2.08% 3.01% 2.12% Consider an index fund manager who has an equities portfolio valued at 100,000,000 British pounds. The portfolio is exclusively invested in the British equities market and tracks the FTSE100 index. The manager seeks to hedge the portfolio from October 17, 2014 to November 17, 2014 (a 1 month horizon) using the December, 2014 FTSE100 futures contract. You are provided with the following details - FTSE100 index as at October 17, 2014=5190 - FTSE100 index futures as at October 17,2014=5250. - Each contract point is worth 10 British pounds - Portfolio value as at October 17, 2014=100,000,000 British pounds - Beta of the portfolio =1 - Correlation between the FTSE100 returns and FTSE100 futures returns =0.95 - FTSE100 futures return standard deviation =1.05 - FTSE100 index return standard deviation =1.00 The return of the underlying spot position as at November 17, 2014 (excluding the futures gain or loss) is equal to (to 2 decimal places) None of these answers 3.26% 2.08% 3.01% 2.12%Step by Step Solution
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