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I wish to hedge my custom stock portfolio for the next 12 months. The portfolio is currently valued at $10 million. I am considering the
- I wish to hedge my custom stock portfolio for the next 12 months. The portfolio is currently valued at $10 million. I am considering the S&P 500 futures contract (value=F) to hedge my position. A regression of daily returns of my portfolio on the total returns of the S&P 500 index produced the estimates: intercept: 0.002 (t-stat=2.9), slope: 1.1 (t-stat=5.9), Adj R-square=0.93.
- What is the hedge ratio for my portfolio? What is my portfolios daily alpha?
- Say the Futures price for the S&P 500 contract is 3,300, and each contract is valued at $250 times the Futures price. How many contracts would I sell or buy to completely purge the influence of the Market?
- How many contracts would I sell or buy to enhance my portfolios beta to 1.7?
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