The S&P 500 futures price is 4372 and you have a portfolio of stocks valued at $20,000,000. Each futures contract is worth $250. If the portfolio moves exactly like the index, how many contracts do you need to hedge this portfolio and what is the implied beta?
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The S&P 500 futures price is 4372 and you have a portfolio of stocks valued at $20,000,000. Each futures contract is worth $250.
If the portfolio moves exactly like the index, how many contracts do you need to hedge this portfolio and what is the implied beta?
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- A portfolio is currently worth $10 million and has a beta of 1.0. An index is currently standing at 800. Explain how a put option on the index with a strike of 700 can be used to provide portfolio insurance.A portfolio of derivatives on a stock has a delta of 2400 and a gamma of –10. An option on the stock with a delta of 0.5 and a gamma of 0.04 can be traded. What position in the option is necessary to make the portfolio gamma neutral? Long/Short and how many options and why?Futures price of a commodity is currently trading at 100. By delivery date, futures price can either rise to 140 or drop to 70. The put option has K =90. To create a hedge portfolio with one put and some futures, we need to ______ futures contract for one put option we long. A. short .25 B. short .35 C. short .28 D. long .35 E. long .28
- Consider a portfolio consisting of 6 stocks and 10 put options on the stocks. The current stock price is S0 = 100 and the stike price of the options is X = 100. The stock pricecan take on only two values at maturity T given by Su = 120 and Sd = 90. The risk-free rate is given by 5%. (1) How many put options with strike price X = 110 are necessary in the portfolio to have a certain payoff at maturity?(2) Find the value of a put option P0 with strike price X = 100.(3) Find the value of a call option C0 with X = 100 by using the Put-Call-Parity. Verify that your answer by calculating the price C0 directly.You manage a $58 million stock portfolio with a beta of 1.05. Given a contract size of $110,000 for a stock index futures contract with a beta of 1.0, calculate the number of contracts will you need to hedge your position.The expected rates of return for Stocks A, B, and C are.10,.15, and .20 respectively. The risk free rate is .03 and the market risk premium is .08 . If you invest$400,$200, and$200in Stocks A, B, and C respectively, what is the beta of the portfolio? Assume that the three stocks are priced in equilibrium.
- An index level of 1,000, what is the value of each contract? If a long stock index futures position on S& P 500 index futures at 1, 051 and has an index of 1, 058 at the settlement date, how much would be the trader’s gain? Complete Solution.A call option has X=$52 and expire in 360 days (suppose we have 360 days in one year). The risk-free rate is 4%. The call is priced at $11. A put option has X-$52 and is priced at $1. The underlying asset is priced at S0=$43. Suppose in our investments, we could involve one call, one put, one bond, and on stock. How much arbitrage profit could we possibly obtain?Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Scenario Probability Market Return Aggressive Stock Defensive Stock 1 0.5 7% 3.7% 5.5% 30 2 0.5 BETA A BETA D 20 Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) 14 b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.) Rate of Return on A % Rate of Return on D %
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