A pension fund investment manager has a portfolio of stocks with
A beta of .87. The value of the portfolio is $6,400,000 and the Mini S&P stock index futures contract settlement at this time is 1065 with a multiple of $50. How many contracts are needed to hedge the cash position (round to a whole number) against a potential fall in stock prices, and what futures position should be taken?

Question

Quizplus · Accepted Answer

No. Contracts = {$6,400,000/(1065 x $50)) x .87 = 105 contracts 
Short Position to make a futures gain if stock prices fall.

A Pension Fund Investment Manager Has a Portfolio of Stocks