A company has a $20 million portfolio with a beta of 1.2. It would like to...
A company has a $20 million portfolio with a beta of 1.2. It would like to use futures contracts on the S&P 500 to hedge its risk. The index futures price is currently 1080, and each contract is for delivery of $250 times the index. How many short futures contracts does the company need if it wants to reduce the beta of the portfolio to 0.6?
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A company has a $20 million portfolio with a beta of 1.2. It
would like to...
4. An investor has a portfolio of stocks worth $9.45 million. The portfolio beta is 0.85....
4. An investor has a portfolio of stocks worth $9.45 million. The portfolio beta is 0.85. The investor plans to use the CME September futures contract on the S&P 500 to change the market risk of the portfolio. The index futures price is currently 2674.90. (The payoff on of each futures contract is based on $250 times the S&P 500 index.) a. What position should the company take to minimize the portfolio’s risk relative to the market? b. What position...
9. A portfolio manager has an equity portfolio that is valued at $75 million. The portfolio has a...
9. A portfolio manager has an equity portfolio that is valued at $75 million. The portfolio has a current beta of .9 and a dividend yield of 1%. It is currently August 15 and the manager is concerned that markets are volatile and the portfolio could lose value, so they decide to hedge. a. The manager will use the S&P 500 index contracts to hedge. The contract is settled in cash at $250 times the contract price. The current S&P...
A fund manager has a portfolio worth $75 million. The beta of the portfolio is 1.15. She plans to use 3-month futures contracts on S&P 500 to hedge the systematic risk over the next 2 months. The current 3-month futures price is 1315, and the mu
A fund manager has a portfolio worth $75 million. The beta of the portfolio is 1.15. She plans to use 3-month futures contracts on S&P 500 to hedge the systematic risk over the next 2 months. The current 3-month futures price is 1315, and the multiplier of the futures contract is $250 times the index. How many futures contracts should the fund manager trade in?
9. A portfolio manager has an equity portfolio that is valued at $75 million. The Portfolio...
9. A portfolio manager has an equity portfolio that is valued at $75 million. The Portfolio has a current beta of .9 and a dividend yield of 1%. It is currently August 15 and the manager is concerned that markets are volatile and the portfolio could lose value, so they decide to hedge. a. The manager will use the S&P 500 index contracts to hedge. The contract is settled n cash at $250 times the contract price. The current S&P...
S&P 500 futures price is 1,000 Value of Portfolio is $5 million Beta of portfolio is...
S&P 500 futures price is 1,000 Value of Portfolio is $5 million Beta of portfolio is 1.5 Multiplier is 50 What position in futures contracts on the S&P 500 is necessary to hedge the portfolio? •What position is necessary to reduce the beta of the portfolio to 0.75? •What position is necessary to increase the beta of the portfolio to 2.0?
You are managing a portfolio of common stocks with a current market value of $100 million. You have decided to hedg...
You are managing a portfolio of common stocks with a current market value of $100 million. You have decided to hedge the price risk for approximately half of the portfolio using CME S&P 500 stock index futures contracts because you believe half of your portfolio's market value moves comparably with this index. Assume the CME S&P 500 stock index futures contract costs $250 per contract times the stated stock market index level. If you agree to sell futures contracts on...
You need to hedge the risk in a stock portfolio that your company owns in it's...
You need to hedge the risk in a stock portfolio that your company owns in it's pension plan using the E-mini S&P500 futures contracts (that has a multiplier of 50). The current value of the portfolio is $325 million and the S&P500 is currently at 2637.72 while the futures price for the next month delivery is at 2643.25. You estimate that the beta of this portfolio is 1.1 while the beta of the S&P500 is 1. What position do you...
A fund manager has a portfolio worth $50 million with a beta of 0.87. The manager...
A fund manager has a portfolio worth $50 million with a beta of 0.87. The manager is concerned about the performance of the market over the next two months and plans to use three-month futures contracts on a well-diversified index to hedge its risk. The current level of the index is 1250, one contract is on 250 times the index, the risk-free rate is 6% per annum, and the dividend yield on the index is 3.15% per annum. The current...
You need to hedge the risk in a stock portfolio that your company owns in it's...
You need to hedge the risk in a stock portfolio that your company owns in it's pension plan using the E-mini S&P500 futures contracts (that has a multiplier of 50). The current value of the portfolio is $325 million and the S&P500 is currently at 2637.72 while the futures price for the next month delivery is at 2643.25. You estimate that the beta of this portfolio is 1.1 while the beta of the S&P500 is 1. What position do you...
Suppose a trader is trying to hedge equity portfolio of beta 1.8 using futures on stock...
Suppose a trader is trying to hedge equity portfolio of beta 1.8 using futures on stock market index. His portfolio is worth $10M today. Assume that the index futures price is $5,000 and each contract is written on 200 times the index. If he take 5 short positions in the stock market index futures, what would be the beta of hedge portfolio? A. 0 B. −0.3 C. 1 D. 1.2 E. 1.3
You are managing a portfolio of common stocks with a current market value of $100 million. You have decided to hedge the price risk for approximately half of the portfolio using CME S&P 500 stock index futures contracts because you believe half of your portfolio's market value moves comparably with this index. Assume the CME S&P 500 stock index futures contract costs $250 per contract times the stated stock market index level. If you agree to sell futures contracts on...
A fund manager has a portfolio worth $50 million with a beta of 0.87. The manager is concerned about the performance of the market over the next two months and plans to use three-month futures contracts on a well-diversified index to hedge its risk. The current level of the index is 1250, one contract is on 250 times the index, the risk-free rate is 6% per annum, and the dividend yield on the index is 3.15% per annum. The current...
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