标题: Reading 38: Risk Management Applications of Forward and Fu [打印本页]
作者: tycoon 时间: 2008-9-16 16:03 标题: [2008] Session 13－Reading 38: Risk Management Applications of Forward and Fu
CFA Institute Area 8-11, 13: Asset Valuation
Session 13: Risk Management Applications of Derivatives
Reading 38: Risk Management Applications of Forward and Futures Strategies
LOS b: Construct a synthetic stock index fund using cash and stock index futures (equitizing cash).
作者: tycoon 时间: 2008-9-16 16:05
An investor has a $100 million stock portfolio with a beta of 1.1. He would like to hedge his portfolio using S&
500 futures contracts, which are currently trading at 596.70. The futures contract has a multiple of 250. Which of the following is the CORRECT trade required to create a synthetic T-bill?
Answer and Explanation
The position created by risk-minimizing hedging is essentially the creation of a synthetic T-Bill. The number of futures contracts required for the risk-minimizing hedge is computed as follows:
Number of contracts = Portfolio value/Futures contract value x beta
$100 million/(596.70 x $250) x 1.1 = 737 contracts
Therefore, the investor has to sell 737 S& 500 futures contracts short.
The position created by risk-minimizing hedging is essentially the creation of a synthetic T-Bill. The number of futures contracts required for the risk-minimizing hedge is computed as follows:
Number of contracts = Portfolio value/Futures contract value x beta
$100 million/(596.70 x $250) x 1.1 = 737 contracts
Therefore, the investor has to sell 737 S& 500 futures contracts short.
作者: tycoon 时间: 2008-9-16 16:05
An investor has a cash position currently invested in T-Bills but would like to "equitize" it by using S& futures contracts. Which of the following trades will create the desired synthetic equity position?
Answer and Explanation
The trader can buy stock index futures and hold them in conjunction with T-Bills to mimic a stock portfolio. So we have:
Synthetic stock portfolio =T-Bills + stock index futures.
The trader can buy stock index futures and hold them in conjunction with T-Bills to mimic a stock portfolio. So we have:
Synthetic stock portfolio =T-Bills + stock index futures.
作者: tycoon 时间: 2008-9-16 16:06
To synthetically create the risk/return profile of an underlying common equity security:
| A) | Sell short the corresponding futures contract and invest in a T-bill. |
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| B) | Buy the corresponding futures contract and borrow at the risk-free rate. |
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| C) | Sell short the corresponding futures contract and borrow at the risk-free rate. |
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D) | Buy the corresponding futures contract and invest in a T-bill. |
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Answer and Explanation
Futures + Cash = Security, therefore, buy the corresponding futures contract and invest in a T-bill.
作者: tycoon 时间: 2008-9-16 16:07
Which of the following statements about portfolio hedging is FALSE?
| A) | Futures contracts have a symmetrical payoff profile. |
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B) | To synthetically create the risk/return profile of an underlying common equity security, buy the corresponding futures contract, sell the common short, and invest in a T-bill. |
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| C) | For a fixed portfolio insurance horizon, using put options generally requires less rebalancing and monitoring than with the use of futures contracts. |
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| D) | The delta of the call option changes as the market value of the underlying security changes. Rebalancing is therefore necessary to maintaining a delta neutral portfolio position. |
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Answer and Explanation
To synthetically create the risk/return profile of an underlying common equity security, buy the corresponding futures contract and invest in a T-bill.
作者: tycoon 时间: 2008-9-16 16:07
To create a synthetic cash position:
| A) | buy the common equity, sell short the corresponding futures contract, invest in a T-bill. |
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B) | buy the common equity and sell short the corresponding futures contract. |
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| C) | sell short the common equity, buy the corresponding futures contract. |
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| D) | sell short the common equity, buy the corresponding futures contract, invest in a T-bill. |
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Answer and Explanation
Security Futures = Cash, therefore, buy the common equity and sell short the corresponding futures contract.
作者: tycoon 时间: 2008-9-16 16:09
When using stock index futures contracts and cash to create a synthetic stock index, the larger the index multiplier:
| A) | the greater the number of needed contracts. |
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| B) | the number of contracts is not affected. |
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| C) | there is no such thing as an index multiplier. |
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D) | the fewer the number of needed contracts. |
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Answer and Explanation
The formula is:
Number of contractsUnrounded = (V*(1 + risk free rate)T) / (futures price * multiplier)
As the multiplier increases, the number of needed contracts declines.
The formula is:
Number of contractsUnrounded = (V*(1 + risk free rate)T) / (futures price * multiplier)
As the multiplier increases, the number of needed contracts declines.
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