You work as a fund manager in the City of London in charge of 100 million fund. The fund is a Growth Fund, with higher risk than FTSE100 index by 10% in terms of beta risk. And assume that your fund is well-diversified. You are afraid that due to expected higher inflation, higher unemployment, higher interest rates, wars, etc, the FTSE100 index and your fund value could go down dramatically in the next 6 months. Discuss in principle how you could hedge/reduce the risk of your fund by the following instruments.

1. FTSE100 Index Options.

1. FTSE100 Index Futures.

1. Sell all assets now and put the money in government bonds.

Discuss in details the pros and cons of above three methods and how the choices of the above financial instruments would affect your fund values in 6 months .