Question
It is July 16. A company has a portfolio of stocks worth $100 million. The beta of the portfolio is 1.2. The company would like
It is July 16. A company has a portfolio of stocks worth $100 million. The beta of the portfolio is 1.2. The company would like to use the CME December futures contract on the S&P 500 to change the beta of the portfolio to 0.5 during the period July 16 to November 16. The index is currently 1,000, and each contract is on $250 times the index.
(a) What position should the company take?
(b) What would be a reason to pursue such a strategy?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
15th edition
1337671002, 978-1337395250
