+1-415-670-9189
info@expertsmind.com
What the underlying asset is-strike price-time to expiration
Course:- Financial Management
Reference No.:- EM13942991




Assignment Help
Assignment Help >> Financial Management

Suppose you are managing a stock portfolio that is currently valued at $2,000,000. You expect the stock market will be bullish in the next 6 months. But you are also aware of a small chance of market crash and you want to insure that your portfolio value will be at least $1,800,000 in 6 months even in a market crash. In other words, you don’t want to suffer more than 10% loss in the next 6 months. Assume your stock portfolio has a beta of 1.5, the current S&P 500 level is 2,000 and the risk-free rate is 1% per annum.

How would you hedge against your portfolio value dropping below $1.8M in 6 months? Be specific with your strategy. If you are using options, specify what the underlying asset is, the strike price, time to expiration. whether it’s a call or a put and how many units to buy or short.




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
Thatcher Corporation’s bonds will mature in 10 years. The bonds have a face value of $1000 and an 8% coupon rate, payable semiannually. The price of the bonds is $1100. The bo
Suppose you have $10,000 in cash and you decide to borrow another $10,000 at a(n) 6% interest rate to invest in the stock market. You invest the entire $20,000 in an exchange-
Travel America Coaches currently sells 15,000 motor homes per year at $94,000 each, and 1,500 luxury motor coaches per year at $159,000 each. The company wants to introduce a
Great Seneca Inc. sells $100 million worth of 29-year to maturity 10.59% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $980 for each $1,000 bond.
Pate & Co. has a capital budget of $3,000,000. The company wants to maintain a target capital structure that is 20% debt and 80% equity. The company forecasts that its net inc
A numerical value used as a summary measure for a sample, such as sample mean, is known as a. The difference between the largest and the smallest data values is the. The numer
What is the total after-tax annual cost of a machine with a first cost of $45,000 and operating and maintenance cost of $0.22 per unit produced? It will be sold for $4,500 at
The Pettit study suggests an increase in the price per share of common stock commensurate with an increase in dividends. - Can this be taken as evidence that the value of the