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Hedging: Long and Short: If You Have Liabilities Now, What Do You Fear?
Hedging: Long and Short: If You Have Liabilities Now, What Do You Fear?
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Hedging Stock Portfolios
Optimal number of contracts to
hedge a portfolio is
Future contracts can be used to
change the beta of a portfolio
If |* >(<) |
S
, hedging implies a long
(short) stock index futures position
11
Rolling The Hedge Forward
What if hedging further in the future than
available delivery dates?
Series of futures contracts used to
increase the life of a hedge
Each time a futures contract matures,
switch position into another, later
contract
Basis risk, cash flow problems possible