Forward Market Futures Market January 2016 January 2016 1720 00 Portfolio Valued

(a)  Explain why the investor takes this hedging strategy.

(b)  How many contracts must he buy to have fully hedge?

(c)  Calculate the profit/loss for both markets.

Forward MarketFutures MarketJanuary 2016January 20161720 00Portfolio valued at $5 million withShort June KLCI @ 1710 90June 2016June 2016CI has dropped to 1680 00Long June KLCI contract @ 1680.00

 

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