You are a portfolio manager and you would like to hedge a portfolio daily over a thirty-day
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Question:
You are a portfolio manager and you would like to hedge a portfolio daily over a thirty-day horizon using futures. The table below provides data on the values of the spot portfolio and the futures that will be used as a hedging instrument:
a) Use the data to find the minimum variance hedge ratio you would use to achieve the hedge.
b) Using the hedge ratio from a., calculate the daily change in value of the hedged portfolio
c) What is the standard deviation of changes in value of the hedged portfolio? How does this compare to the standard deviation of changes in the unhedged spot position?
Related Book For
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
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