When the Portfolio Manager Wants to Hedge a Stock Portfolio

question 10

True/False

When the portfolio manager wants to hedge a stock portfolio using an index futures contract, he or she must know: 1) the total dollar value of the portfolio, 2) the current index futures price, and 3) the relative volatility of the portfolio to the market.

---

Definitions:

Standard Cost

A predetermined cost of manufacturing a product or providing a service, used as a benchmark to measure performance and efficiency.

Volume Variance

The difference between the planned volume of production or sales and the actual volume, which can affect costs and revenue.

Overhead

Indirect costs associated with running a business that can't be directly attributed to a specific product or service, such as utilities and rent.

Standard Costs

Predetermined costs for materials, labor, and overhead used as benchmarks in budgeting and performance evaluation.