Question
Suppose that on October 15, 1997, we have a long position in the S&P500, worth $50 million. We are becoming increasingly concerned with the market
Suppose that on October 15, 1997, we have a long position in the S&P500, worth $50 million. We are becoming increasingly concerned with the market prospects, and want to set up a zero-beta portfolio by using futures contract on the S&P500. We consider the December futures. Relevant information:
S&P500 futures contract size: 500 units of the index.S&P500 index value on October 15 is 965.72.
S&P500 futures price on October 15 is 973.50.
(a) How many S&P500 futures contracts should we sell?
(b) Suppose that the spot and futures price over the next two weeks are the following
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