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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
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.
\begin{tabular}{|l|l|l|} \hline Contract Code & Future contract name & \\ \hline LCO & ICE Europe Brent Crude Electronic Energy Future & Currency \\ \hline CL & NYMEX Light Sweet Crude Oil (WTI) Electronic Energy Future & \\ \hline UUD = & AUSTRALIAN DOLLAR/US DOLLAR FX SPOT RATE & USD \\ \hline \end{tabular}Step by Step Solution
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