A company has a $27.5 million equity portfolio that has a beta of 1.2 and which is
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A company has a $27.5 million equity portfolio that has a beta of 1.2 and which is invested in the US stock market. It would like to use S&P futures as part of a trading strategy to hedge risk. The index is currently standing at 1155 and each contract is for delivery of $250 times the index.
1. What is the hedge transaction that minimizes the portfolio's market risk?
2. What should the company do if it wishes to reduce the portfolio to a beta of 0.6?
Related Book For
Fundamentals of Investments, Valuation and Management
ISBN: 978-1259720697
8th edition
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin
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