A Trader Has a Portfolio Worth $5 Million That Mirrors

question 17

Multiple Choice

A trader has a portfolio worth $5 million that mirrors the performance of a stock index. The stock index is currently 1,250. Futures contract trade on the index with one contract being on 250 times the index. To remove market risk from the portfolio the trader should

• A) Buy 16 contracts
• B) Sell 16 contracts
• C) Buy 20 contracts
• D) Sell 20 contracts

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Definitions:

Cognitive Therapy

A type of psychotherapy that emphasizes the role of cognitive processes in the development and maintenance of psychological disorders, aiming to alter maladaptive thinking patterns.

Cognitive Therapy

A form of psychological treatment that focuses on changing unhelpful or dysfunctional thoughts, beliefs, attitudes, and behaviors, aiming to improve emotional regulation and develop personal coping strategies.

Psychoanalysis

A therapeutic approach and theory of psychology developed by Sigmund Freud, focusing on unconscious motives and conflicts.

Token Economy

A behavioral modification technique where desired behaviors are reinforced with tokens that can be exchanged for rewards.