Calculate the number of futures contracts

Reference no: EM133377305

Question: An investment management firm wishes to increase the beta for one of its portfolios under management from 0.95 to 1.20 for a three-month period. The portfolio has a market value of $175,000,000. The investment firm plans to use a futures contract priced at $105,790 in order to adjust the portfolio beta. The futures contract has a beta of 0.98.

Calculate the number of futures contracts that should be bought or sold to achieve an increase in the portfolio beta.
At the end of three months, the overall equity market is up 5.5%. The stock portfolio under management is up 5.1%. The futures contract is priced at $111,500. Calculate the value of the overall position and the effective beta of the portfolio.
Provide a short comment on the effectiveness of this strategy.

Reference no: EM133377305

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