Implementation of sophisticated derivative strategies

Reference no: EM131016491

As the manager of a large, well-diversified school endowment fund, you are actively considering the implementation of sophisticated derivative strategies to protect your fund's market value in the event of a substantial decline in the overall level of equity prices. Your colleagues have suggested that you acquire either (1) a short position in an S&P 500 Index futures contract, or (2) a long position in an S&P index put option contract. Explain how each of these derivative strategies would affect the risk and return of the re- sulting augmented endowment portfolio.

Reference no: EM131016491

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