A pension fund manager expects a cash inflow of $250 million in two weeks. He wishes to

Question:

A pension fund manager expects a cash inflow of $250 million in two weeks. He wishes to avoid missing a significant increase in equity prices over the next two weeks. Assume that the beta of the under management is 1.1. A stock index futures contract is quoted at 1225 and has a multiplier of 250. The current stock index is also 1225.
a. Indicate whether the pension fund manager should undertake a long hedge or a short hedge.
b. How many contracts should be bought or sold?
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...