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Brrunno [24]
3 years ago
5

The manager of a $600,000 aggressive stock portfolio wishes to hedge with OEX 600 Put contracts. The portfolio has a beta of 2.

To hedge, the manager will buy:_______
Business
1 answer:
Anvisha [2.4K]3 years ago
3 0

Answer: 20 contracts

Explanation:

It should be noted that each OEX 600 Put contract will cover:

= 100 × 600

= $60,000 of stock

Therefore, to hedge $600,000 portfolio, ($600,000/$60,000) = 10 contracts will be needed.

Since the portfolio has a beta of 2, this means that:

=2 x 10 contracts

= 20 contracts will be needed.

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