When the portfolio manager wants to hedge a stock portfolio using an index futures contract,he or she must know: 1)the total dollar value of the portfolio,2)the current index futures price 3)the relative volatility of the portfolio to the market.

Question

Quizplus · Accepted Answer

Knowing the total dollar value of the portfolio, current index futures price, and relative volatility of the portfolio to the market are all important factors in determining how to effectively hedge the stock portfolio with an index futures contract.

When the Portfolio Manager Wants to Hedge a Stock Portfolio