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Risk and return of resulting augmented endowment portfolio

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1. Differentiate between at the money, in the money, and out of the money put and call options.

2. As a manager of a large, well-diversified school endowment fund, you are considering implementing sophisticated derivative strategies to protect your fund's market value in the event of a substantial decline in the overall level of equity price. Your colleagues have suggested that you could use put options, call options, and futures contract. Explain how each of these derivative strategies could be used and how it would affect the risk and return of the resulting augmented endowment portfolio.

Reference no: EM132953407

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