Question
Suppose you short 80 units in the spot market. Each futures contract is for 2 units. For every $1 increase in the spot price, the
Suppose you short 80 units in the spot market. Each futures contract is for 2 units. For every $1 increase in the spot price, the futures price decreases by $1.25. You want to engage in a risk minimizing hedge. What should you do?
A. Sell 32 futures contracts
B. Sell 50 futures contracts
C. Buy 32 futures contracts
D. Buy 50 futures contracts
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International Financial Management
Authors: Cheol S. Eun, Bruce G.Resnick
6th Edition
71316973, 978-0071316972, 78034655, 978-0078034657
