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Consider a 1m position in an equity portfolio with a beta of 5. The current value of a stock index is 4,000 points with a
Consider a 1m position in an equity portfolio with a beta of 5. The current value of a stock index is 4,000 points with a continuously compounded dividend yield of 3%. A futures contract written on the index has a contract multiple of 10 and 4 months to maturity. The relevant risk-free rate of interest is 5%. Calculate the futures position required to hedge the portfolio using a beta hedge.
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