Suppose you manage a $2 million portfolio. Assume that the expected return of your portfolio is...
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Suppose you manage a $2 million portfolio. Assume that the expected return of your portfolio is 18% per year, E(m) = 11% per year, the risk-free rate is 1% per year, and So = 3,200. You are worried that the market might fall after one year. How many one- year S&P E-Mini futures contracts do you need to hedge your portfolio? To hedge your risk exposure, should you hold a long position or a short position in the futures contracts? Suppose you manage a $2 million portfolio. Assume that the expected return of your portfolio is 18% per year, E(m) = 11% per year, the risk-free rate is 1% per year, and So = 3,200. You are worried that the market might fall after one year. How many one- year S&P E-Mini futures contracts do you need to hedge your portfolio? To hedge your risk exposure, should you hold a long position or a short position in the futures contracts?
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To hedge your portfolio against a potential market fall you would need to hold a short position in S... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0133400694
1st canadian edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi
Posted Date:
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