What is the net hedging result

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In early April, an insurance company portfolio manager has a stock portfolio of $200 million with a portfolio beta of 1.15. The portfolio manager plans on selling the stocks in the portfolio in June to be able to pay out founds to policyholders for annuities, and is worrried about a fall in the stock market. In April, the CME Group S&P 500 Futures contract index is 2340.40 for a June futures contract ($250 muliplier for the contract).

What type of position should be taken?

Why this position?

What is the number of contracts?

Suppose in June the stock market (S&P 500 index) falls by 10% and the S&P500 futures index falls by 10% as well.

What is the spot gain or loss?

What is the futures gain or loss?

What is the net hedging result

Reference no: EM131541279

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