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It is Jan 31, you expect to sell your stock portfolio 3 monthslater on April 30. Today the

It is Jan 31, you expect to sell your stock portfolio 3 monthslater on April 30. Today the

It is Jan 31, you expect to sell your stock portfolio 3 monthslater on April 30. Today the portfolio worths $1 million. Andtoday, price of the April stock index futures is $20000 whereas theMay stock index futures is $25000. At the end of April, the valueof your stock portfolio becomes $700000. The price of the Aprilstock index futures contract becomes 14000 whereas the price of theMay stock index futures becomes 20000. Please calculate the overallprofit or loss at the end of April if you had hedged your portfoliowith the appropriate futures (correctly chosen) using a simplenaive hedge.

Abhinav 04-Dec-2019

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