Neutralizing Equity Exposure
I am referencing problem 40, Practice Exam II, Vol 1 Afternoon but the question is relevant more generally.
When asked to neutralize the exposure to equities it seems there are two methods that produce different results.
Say I have a long position in equity $1 Bn.
Method 1: I can hedge this via futures : Nf = [ (Beta Target - Beta Current)/Beta Future ] * (Stock $ Value / p*q).
Method 2: I can turn the position into synthetic cash also by using futures. Here the formula is slightly different: Nf = V(1+r)^T / p * Q
These produce different results. Logically they should be equivalent since they both produce a zero beta exposure that should earn the risk-free rate. What am I missing here? |
发表于 2013-4-22 14:00
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