Unformatted text preview: worth $250*S&P500. The S&P 500 is currently worth 1400. How would you use these futures contracts to decrease the beta of your portfolio to 0? A 1% increase in the S&P increases the value of the portfolio by 1.2% (beta =1.2) or 120,000. To set beta = 0 we need to sell futures. To find how many futures to sell, note that a 1% increase in the S&P causes a futures contract to gain (1400*.01)*250 = 3500. To set beta equal to zero sell 120000/3500 = 34.29 futures contracts...
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- Winter '08
- Futures exchange, Rational pricing, Commodity Futures Trading Commission, Chicago Mercantile Exchange