What should it do if it wants to increase beta

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Reference no: EM131964553

JP Morgan has a $650 Million portfolio of pension assets for a certain company invested in stocks with a Beta of 1.33. It is interested in using S&P futures contracts to hedge the portfolio as it expects a near term decline in the market.

The futures price is currently 1,744 and contract specification call for the delivery of $250 times whatever the index value happens to be.

Describe the hedge that minimizes risk.

What should JP Morgan do if it wants to reduce Beta to .70? What should it do if it wants to increase Beta to 1.6? Please show work.

Reference no: EM131964553

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