On Wednesday the 12th Aril 2023, your company has a reasonably broadly based portfolio of Australian shares valued on that date at $65,700,00. You will be required to seek to protect the value of that portfolio as the company intends to liquidate the portfolio. You will seek to do this by entering into a number of June 23 SPI200 futures contracts as either a buyer or a seller.

On Friday the 28th April 2023, you will be notified that the portfolio of shares has been sold for $63,200,000. The decrease in the value of the portfolio was largely due the fact the the portfolio was not as broadly as you have been told, as it was heavily dependent on a few companies that have performed poorly due to rising cost of materials and labour shortage throughout April. You must now close out your position and do so at the settlement price of the June 23 SPI200 futures contract. Provide a report how the hedge performed and explain why you could not achieve a perfect hedge.

Value of the portfolio on 12th April 2023: $65,700,000

Value of the portfolio on 28th April 2023: $63,200,000

Loss in portfolio value: $65,700,000 - $63,200,000 = $2,500,000

The settlement price of the June 23 SPI200 futures contract is $96.010.