2. You manage a $13.5 million portfolio currently all invested in equities and has a beta of 1.2. You believe that the market is on the verge of a big but shortlived downturn; you would move your portfolio temporarily into T-bills but you do not want to incur the transaction costs of liquidating and reestablishing your equity position. Instead you decide to temporarily hedge your equity holding with S&P 500 index futures contracts. 1) Should you be long or short the contracts? Why? 2) How many contracts should you enter into? The S&P 500 index futures price is now at 1286 and the contract multiplier is $250. 3) Suppose instead of reducing your portfolio beta all the way down to zero you decide to reduce it to 0.5 how many index futures contracts should you enter into?
You manage a $13.5 million portfolio currently all invested in equities
by | Sep 6, 2025 | Statistics
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