Assume you have AUD500,000 cash to be invested in an equal-weighted portfolio on January 2, 2020 for 3 months. The portfolio will comprise four Australian stocks: WPL, COE, OSH and BPT, all of which are from the oil exploration and production sector. Identify a major risk in your portfolio of stocks to hedge with an appropriate futures contracts.

Assessment criteria: o Identification of major risk o Methodology for identification of major risk. o Rationale for selection of futures contract for hedging.

Contract Code	Future contract name	Currency
LCO	ICE Europe Brent Crude Electronic Energy Future	USD
CL	NYMEX Light Sweet Crude Oil (WTI) Electronic Energy Future	USD
AUD=	AUSTRALIAN DOLLAR/US DOLLAR FX SPOT RATE	N/A

0.61 LCOc1 LCOC2 LCOC3 CLc1 CLc2 CLc3 WPL.AX COE.AX OSH.AX BPT.AX AUD date Trade Cic Trade Cic Trade Clc Trade Cic Trade Clc Trade Cic Trade Clc Trade Cic Trade Cic Trade Cic Close 2/01/2020 66.25 65.56 64.97 61.18 60.95 60.64 34.47 0.61 7.07 2.52 0.6993 31/12/2019 66.00 65.29 64.68 61.06 60.77 60.41 34.38 0.61 7.06 2.51 0.7021 30/12/2019 68.44 66.67 65.99 61.68 61.44 61.10 34.92 0.63 7.18 2.56 0.6994 27/12/2019 68.16 66.87 66.14 61.72 61.53 61.21 34.97 0.63 7.23 2.57 0.6977 26/12/2019 67.92 66.76 66.05 61.68 61.48 61.16 35.04 0.62 7.19 2.60 0.6945 25/12/2019 67.20 66.16 65.46 61.11 60.94 60.65 35.04 0.62 7.19 2.60 0.6919 24/12/2019 67.20 66.16 65.46 61.11 60.94 60.65 35.04 0.62 7.19 2.60 0.6920 23/12/2019 66.39 65.42 64.73 60.52 60.35 60.07 34.73 7.14 2.52 0.6922 20/12/2019 66.14 65.20 64.51 60.44 60.25 59.95 34.85 0.62 7.23 2.57 0.6898 19/12/2019 66.54 65.59 64.84 61.22 61.18 60.88 35.27 0.64 7.25 2.56 0.6884 18/12/2019 66.17 65.23 64.49 60.93 60.85 60.56 35.33 0.63 7.36 2.69 0.6852 17/12/2019 66.10 65.15 64.41 60.94 60.87 60.53 35.23 0.63 7.12 2.67 0.6850 16/12/2019 65.34 64.41 63.71 60.21 60.14 59.85 34.97 0.62 7.17 2.66 0.6884 13/12/2019 65.22 64.25 63.51 60.07 59.98 59.67 34.63 0.60 7.16 2.61 0.6875 12/12/2019 64.20 63.28 62.55 59.18 59.06 58.76 34.25 0.61 7.10 2.58 0.6908 11/12/2019 63.72 62.82 62.10 58.76 58.65 58.36 34.33 0.61 7.13 2.61 0.6874 10/12/2019 64.34 63.46 62.76 59.24 59.14 58.88 34.07 0.58 7.01 2.63 0.6809 9/12/2019 64.25 63.28 62.54 59.02 58.92 58.64 34.35 0.57 7.04 2.62 0.6822 6/12/2019 64.39 63.39 62.62 59.20 59.10 58.78 33.72 0.54 6.88 2.49 0.6838 5/12/2019 63.39 62.48 61.79 58.43 58.34 58.06 33.57 0.55 6.92 2.40 0.6833 4/12/2019 63.00 62.20 61.60 58.43 58.34 58.04 32.93 0.53 6.82 2.31 0.6849 3/12/2019 60.82 60.11 59.61 56.10 56.03 55.82 33.68 0.54 6.92 2.34 0.6846 2/12/2019 60.92 60.23 59.74 55.96 55.91 55.74 34.22 0.54 7.11 2.43 0.6817 29/11/2019 62.43 60.49 59.85 55.17 55.14 54.98 34.51 0.54 7.25 2.40 0.6764 28/11/2019 63.87 63.27 62.61 58.11 58.05 57.85 34.56 0.54 7.19 2.38 0.6768 27/11/2019 64.06 63.01 62.30 58.11 58.05 57.85 34.25 0.54 7.18 2.33 0.6775 26/11/2019 64.27 63.21 62.51 58.41 58.32 58.06 34.28 0.54 7.10 2.38 0.6787 25/11/2019 63.65 62.62 61.93 58.01 57.91 57.63 33.99 0.54 7.11 2.34 0.6777 22/11/2019 63.39 62.37 61.63 57.77 57.66 57.35 34.00 0.54 7.05 2.32 0.6786 21/11/2019 63.97 62.94 62.19 58.58 58.41 58.02 33.60 0.54 6.98 2.28 0.6784 20/11/2019 62.40 61.47 60.78 57.11 57.01 56.88 33.99 0.54 7.04 2.32 0.6802 19/11/2019 60.91 60.02 59.34 55.21 55.35 55.26 34.43 0.55 7.17 2.37 0.6825 18/11/2019 62.44 61.53 60.83 57.05 57.14 57.00 34.25 0.56 7.19 2.36 0.6808 15/11/2019 63.30 62.40 61.71 57.72 57.83 57.69 33.99 0.57 7.18 2.38 0.6819 14/11/2019 62.28 61.41 60.75 56.77 56.88 56.77 33.82 0.57 7.14 2.35 0.6786 13/11/2019 62.37 61.54 60.89 57.12 57.20 57.09 33.80 0.56 7.13 2.32 0.6837 12/11/2019 62.06 61.24 60.60 56.80 56.85 56.74 34.13 0.58 7.21 2.45 0.6840 11/11/2019 62.18 61.30 60.60 56.86 56.90 56.77 34.12 0.58 7.21 2.42 0.6849 8/11/2019 62.51 61.62 60.91 57.24 57.26 57.10 33.63 0.57 7.19 2.40 0.6859 7/11/2019 62.29 61.41 60.70 57.15 57.15 56.93 32.96 0.58 7.15 2.36 0.6897 6/11/2019 61.74 60.89 60.19 56.35 56.38 56.20 33.07 0.58 7.23 2.41 0.6882 5/11/2019 62.96 62.13 61.46 57.23 57.29 57.15 33.12 0.58 7.09 2.43 0.6893 4/11/2019 62.13 61.35 60.71 56.54 56.60 56.47 32.72 0.58 7.04 2.40 0.6883 1/11/2019 61.69 60.97 60.38 56.20 56.27 56.15 32.46 0.56 7.01 2.35 0.6913