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Please answer with all the necessary calculations and explanations in detail. What is meant by Open interest, price ticks, price limits, intimal margin, maintenance margin
Please answer with all the necessary calculations and explanations in detail.
What is meant by Open interest, price ticks, price limits, intimal margin, maintenance margin and delivery options in a future contract? It is 4th October 2021; you are managing HDFC mutual fund and wish to hedge its Rs 700 million stock portfolio. The hedge period is three months and beta of the equity portfolio is 1.8. The dividend yield on equity portfolio q is 4.5% per annum with semiannual compounding, and the risk-free interest rate r is 6.5% per annum with semiannual compounding. You chose to hedge with January 2022 futures on S\&P BSE 500 index with T=3/12 years to expiry. The current level of SP 500 is 23881 and contract multiple is Rs 10 per index point. How many futures contract should you short in order to hedge the equity portfolio? What is the expected return on portfolio if the BSE SP 500 index turns out to be 25250 in three months and the futures price be Rs. 23900 at this time? Also find the expected value of the headers position, including the gain or loss on the hedgeStep by Step Solution
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