You own:

• 19,000 shares of Delta Airlines (price 57, beta 1.2)
• 11,500 shares of Coca-Cola (price 46, beta 0.3)
• 2,650 shares Intel (price 55.70, beta 0.6)

All questions are related to each other and you need answers from previous questions to answer other questions.

1. What is your portfolios beta?
2. The nearby S&P500 Index futures contract has a settlement price of 2,989. How would you beta-hedge your Delta position? Use the institutional size S&P futures contract worth $250 per point of mark-to-market.
3. How would you beta-hedge your entire portfolio?
4. How would you dollar-hedge your entire portfolio? Dollar-hedge means ignore the beta; i.e., just make the quantitative adjustment.
5. Assume you did as in 3 (assume initial margin of 0 just for this). Suppose after one week the market, as represented by the S&P500, declines 5%.

Assume the futures settlement price in one week follows the change (in %) of the cash market.

Assume the stocks in your portfolio change according to their respective betas.

Compare the total value of your portfolio after that week including the mark-to-market on your futures position with its initial value.