A portfolio manager holds a portfolio that mimics the ASX 200 Stock Index. The ASX 200...
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A portfolio manager holds a portfolio that mimics the ASX 200 Stock Index. The ASX 200 started the year at 5,000 and is currently at 6,000 points. The manager's fund was valued at $265 million at the beginning of the year and is now worth $318 million. The March SPI 200 future price is currently 6,600 points. a) Explain to the manager how she could protect the portfolio from decreasing in value using the available March futures contract. What position would the manager need to take and in how many contracts? b) What is the upfront cost of implementing this hedging strategy? A portfolio manager holds a portfolio that mimics the ASX 200 Stock Index. The ASX 200 started the year at 5,000 and is currently at 6,000 points. The manager's fund was valued at $265 million at the beginning of the year and is now worth $318 million. The March SPI 200 future price is currently 6,600 points. a) Explain to the manager how she could protect the portfolio from decreasing in value using the available March futures contract. What position would the manager need to take and in how many contracts? b) What is the upfront cost of implementing this hedging strategy?
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a To protect the portfolio from decreasing in value the manager could use the March SPI 200 futures ... View the full answer
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