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You Have $500 000 Invested in a Property Index,which Has

Question 9

Multiple Choice

You have $500 000 invested in a property index,which has a current value of 4000.00.If a put option is available with an exercise price of 3800,standard deviation of returns is 20%,time to maturity is 6 months and risk free rate is 8% p.a. ,how many contracts are required for an exact hedge of this index? Assume an index point value of $10.00.


A) 13
B) 3
C) 40
D) 50

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