Question
Create an intermarket hedge betting that technology stocks will outperform finance stocks. September Technology stock futures are trading at 650.13, have a standard deviation of
Create an intermarket hedge betting that technology stocks will outperform finance stocks. September Technology stock futures are trading at 650.13, have a standard deviation of 52% and a 0.8 correlation with the market. September Finance stock futures are trading at 126.4, have a standard deviation of 108.08% and a 0.4 correlation with the market. The market's standard deviation is 18%.
What is your profit on August 15th if you close out your positions with Technology futures at 637 and finance futures at 108.08? Both futures have a $100 multiplier.
Provide your answer rounded to two decimals.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started