Hightower investments holds a portfolio of NASDAQ 100 stocks worth $44,000,000. The firm wants to hedge its portfolio risk, but futures are only available on the NASDAQ composite index. NASDAQ 100 is currently at 550 and the NASDAQ composite is at 1,220. Each futures contract on the NASDAQ composite is for 200 units of the index. (NASDAQ 100) = 50, (NASDAQ Composite) = 130, = 0.88. Q1. What is the minimum variance hedge ratio Q2 How many units of NASDAQ composite are required to hedge the position? Q3. Long or short? FINA 471 - Derivatives Securities I