XYZ Ltd. is a pension fund managing the portfolios of people saving for the later years of their lives. As such, it prides itself on delivering low but reliable returns on investment, which consist of 70% of government bonds, 10% equity, and 20% real estate. The high volatility of the real estate portion of the fund, however, is worrisome. Design a hedging strategy, employing options while not buying or selling any assets. Also, examine the fund’s portfolio strategy and assess real estate investments, valuations, and the risks to which it might be exposed.

Answer rating: 100% (QA)

To design a hedging strategy for the real estate portion of the fund XYZ Ltd can consider using options specifically put options A put option gives th... View the full answer