Multiple Choice
You manage a $15 million hedge fund portfolio with beta = 1.2 and alpha = 2% per quarter. Assume the risk-free rate is 2% per quarter and the current value of the S&P 500 Index is 1,200. You want to exploit the positive alpha, but you are afraid that the stock market may fall and you want to hedge your portfolio by selling 3-month S&P 500 future contracts. The S&P contract multiplier is $250.
Hedging this portfolio by selling S&P 500 futures contracts is an example of ________.
A) statistical arbitrage
B) pure play
C) a short equity hedge
D) fixed-income arbitrage
Correct Answer:
Verified
Correct Answer:
Verified
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