Solution-What is the hedge that minimizes risk

What is the hedge that minimizes risk

Reference no: EM132951936

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 is currently standing at 1080, and each contract is for delivery of $250 times the index.

a) What is the hedge that minimizes risk?

b) What should the company do if it wants to reduce the beta of the portfolio to 0.6?

Reference no: EM132951936

Questions Cloud

Funding of longer-term assets with short-term borrowing : During the GFC, the funding of longer-term assets with short-term borrowing was identified as a point of weakness in the operations of financial institutions.

Find the enterprise value of hardee : You want to find the enterprise value of Hardee's. You know that their EBITDA is $2,441 million, interest-bearing debt is $2,127 million

What were the number of units started during november : A total of 25,000 units were completed and transferred out of the department during the month. What were the number of units started during November

What is the two-year par yield : Suppose that 6-month, 12-month, 18-month and 24-month zero rates are 5%, 6%, 6.5% and 7% respectively, what is the two-year par yield?

What is the hedge that minimizes risk : 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 is currentl

Balance up the accounts and draw a trial balance : Paid trade payables by cheque 10,755. Balance up the accounts and draw a trial balance as it would appear on 31st October, 2019

What is the project irr : XYZ Corp. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the WACC or nega

Explain simpson paradox : -Explain Simpson's paradox and provide an example different from the one listed in your textbook.

Definition of assets and liabilities subsequently : Explain why the changes it made in the definition of assets and liabilities subsequently had implications for the profits of reporting entities.

User Account

All Pages

What is the hedge that minimizes risk

Reference no: EM132951936

Reference no: EM132951936

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT