Your investment bank has an investment of $300 million in the stock of the Swiss Roll Corporation
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Question:
Your investment bank has an investment of $300 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 | -15% | -10% |
February | -20% | -5% |
March | -30% | 0% |
April | 40% | 10% |
May | 50% | 15% |
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?
Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
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