A Portfolio Manager in Charge of a Portfolio Worth $10

question 6

Multiple Choice

A portfolio manager in charge of a portfolio worth $10 million is concerned that the market might decline rapidly during the next six months and would like to use put options on an index to provide protection against the portfolio falling below $9.5 million.The index is currently standing at 500 and each contract is on 100 times the index.What position is required if the portfolio has a beta of 0.5?

• A) Short 200 contracts
• B) Long 200 contracts
• C) Short 100 contracts
• D) Long 100 contracts

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Definitions:

Quotas

Regulatory measures imposing limits on the amount or value of goods that can be traded, typically used in international trade.

Export Subsidies

Government payments made to domestic firms to encourage exports.

Tariff

A tax imposed on imported goods and services to increase their price, intended to protect domestic industries and adjust trade deficits.

Tax

A mandatory financial charge or levy imposed by a government on individuals or entities to fund public services and projects.