A portfolio manager wants to apply risk management techniques using forward and futures strategies. The manager had
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Question:
- A portfolio manager wants to apply risk management techniques using forward and futures strategies. The manager had $ 5,000,000 in the portfolio. He wants to increase the beta exposure from 0.8 to 1.1 Beta on futures is 1.05 and total futures price is $240,000.
- A) Calculate the required number of futures contracts to get to 1.1
- B) Calculate the required number of futures contracts to get to 0
- Continuing with the question, assume the unhedged portfolio increased in value 5.1% from $5,000,000 to $5,255,000 and futures price also increased 5.1% from 240,000 to 252,240. One month remains to contract expiration. The market had a return of 5.2%. For each scenario, compute the:
- i) Hedged portfolio ending value
- ii) Ex-post beta
Related Book For
Research Methods For Business Students
ISBN: 9781292208787
8th Edition
Authors: Mark Saunders, Philip Lewis, Adrian Thornhill
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