question archive 1°) DERIVATIVES An Investor has a well-diversified portfolio of Spanish shares, belonging to the IBEX 35 Index, with a current market value of 100 million Euros (the portfolio replicates exactly the IBEX35)
1°) DERIVATIVES An Investor has a well-diversified portfolio of Spanish shares, belonging to the IBEX 35 Index, with a current market value of 100 million Euros (the portfolio replicates exactly the IBEX35)
Subject:FinancePrice: Bought3
1°) DERIVATIVES An Investor has a well-diversified portfolio of Spanish shares, belonging to the IBEX 35 Index, with a current market value of 100 million Euros (the portfolio replicates exactly the IBEX35). There are fears of a fall in share prices in coming months due to the slowdown in the recovery of mayor economies in the world. The Investor wants to protect the portfolio against such possible event. Suppose that today the IBEX 35 is at 9,200 a) You are requested to propose two hedging strategies to the Investor. There are a Put Option (strike price at 9,200; maturity in three months) and a Future Contract (strike price at 9,200; maturity in three months). b) Compute the return obtained by the investor if in three months the IBEX b.1) decreases to 9,000 b.2) increases to 9,500 Suppose that for Buying a Put contract at 9,200 the Premium is 10 Euro. The multiplier for Futures and Options Contracts over the BEX35 is 10 (ten times, this is a definition of the traded contract).
