Swiss Roll Corporation Discussion Question - CLO 1, 2, 3, 7

Your investment bank has an investment of $100 million in the stock of the Swiss Roll Corporation and a short position in the stock of the Frankfurter Sausage Company. Here is the recent price history of the two stocks:

Percentage price change

Month	Frankfurter Sausage	Swiss Roll
January	-10%	-10%
February	-10%	-5%
March	-10%	0%
April	10%	0%
May	10%	5%
June	10%	10%

• Using the evidence from these six months, how large would your short position in Frankfurter Sausage need to be to hedge as far as possible against movements in the price of Swiss Roll?