Suppose the S&P 500 currently has a level of 2000. Over the next year you wish to hedge a $4,000,000 portfolio that has a beta of 1.5. S&P futures contracts have a one-year maturity and a contract multiplier of 250.

How many S&P 500 futures contracts do you need to hedge your portfolio? Are you long or short these contracts?

Briefly explain whether your overall hedged portfolio is riskless.

Briefly explain the main differences between forwards and futures contracts.