Diversified portfolio of shares on spanish stock market

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Question

An investor has a diversified portfolio of shares on the Spanish stock market, belonging to the IBEX35 index and valued at 1,000,000€. Given the slow overall economic evolution, investors fear a decline on the future evolution of the stock market. For that reason, the investors want to protect his portfolio against a fall on the market. Assume that the IBEX35 is nowadays in 8,500. a. Design strategies to hedge the risk. b. Calculate the return obtain in 3 months if the IBEX35 i. fall to 8,235 ii. Same if rise to 8,900 Assume that a put IBEX35 at 8,500 cost a premium of 1.5€ and a call at 8,500 cost 1€. The market multiplier for the options is 1 (MiniIBEX35) and for the futures is 10 (IBEX35).

Reference no: EM133495892

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