New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here


by: Mr. Kaitlin Herman

Investments FINOPMGT 320

Mr. Kaitlin Herman
GPA 3.72

Ben Branch

Almost Ready


These notes were just uploaded, and will be ready to view shortly.

Purchase these notes here, or revisit this page.

Either way, we'll remind you when they're ready :)

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

Ben Branch
Class Notes
25 ?




Popular in Course

Popular in Finance

This 3 page Class Notes was uploaded by Mr. Kaitlin Herman on Friday October 30, 2015. The Class Notes belongs to FINOPMGT 320 at University of Massachusetts taught by Ben Branch in Fall. Since its upload, it has received 28 views. For similar materials see /class/232326/finopmgt-320-university-of-massachusetts in Finance at University of Massachusetts.


Reviews for Investments


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 10/30/15
FINOPMGT 320 Investment Chapter 17 What do you think active managers will do if the market is expected to rise Using futures in active equityportfolio management Traditionally when the market was expected to rise active managers would sell lowbeta stocks and buy highbeta stocks to raise the portfolio s weighted average beta Alternatively the use of futures provides a quicker and cheaper way to do this with less disruption to the traits of the portfolio Where is SampP 500 index futures contract is traded What is the value of one SampP 500 futures contract traded on Chicago Mercantile Exchange CME 8 Suppose you own a stock portfolio worth 15 million with a beta of 13 The current value of the SampP 500 index is 98537 8a What is the value of one SampP 500 futures contract One SampP 500 futures contract 250 x 98537 246342 81b How many futures contract must you buy or sell to completely hedge the value of the portfolio against an expected market decline F x 246342 7916 F In order to make the portfolio market neutral it is necessary to sell 8 rounded futures contracts 8c Suppose the market as measured by the SampP 500 drops 10 percent over the course of the neXt several months What is its impact on your hedged portfolio i In futures market If the market drop by 10 percent SampP 500 goes from 98537 to 88683 Sold 8 SampP 500 contracts 250 X 98537 1970740 Bought 8 SampP 500 contracts 250 X 88683 1773660 Pro t in futures 197080 ii Unhedged stock portfolio A 10 percent market decline equals a 13 portfolio decline assuming a beta of 13 1500000 X 10 X 13 195000 loss in portfolio value 1500000 195000 1305000 new portfolio value iii Hedged portfolio Profit in futures 197080 Loss in portfolio value 195000 Profit 2080 A perfectly hedged portfolio should be market neutral that is no pro ts or losses In this case a small pro t occurred due to rounding 8d If the market rises by 10 percent SampP 500 goes from 98537 to 108391 i In futures market Sold 8 SampP 500 contracts 250 X 98537 1970740 Bought 8 SampP 500 contrac s 250 X 108391 2167820 Loss in futures 197080 ii Unhedged stock portfolio 114310 percent market rise equals a 13 portfolio rise assuming a beta of 1500000 X 10 X 13 195000 gain in portfolio value 1500000 195000 1695000 new portfolio value iii Hedged portfolio Loss in futures 197080 Gain in portfolio value 195 00 Loss 2080 A perfectly hedged portfolio should be market neutral that is no pro ts or osses In this case a small loss occurred due to rounding


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Amaris Trozzo George Washington University

"I made $350 in just two days after posting my first study guide."

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."


"Their 'Elite Notetakers' are making over $1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.