Respuesta :
You want to protect your diversified investment portfolio from market drops. The best cross-hedge for this use would be one of the following: selling S&P 500 index futures short (Section 14.5).
What a perfect hedge means Do perfect hedges usually produce better results than defective ones? Describe your response.
(2 markings) 4b) 4bi) A flawless hedge entirely removes the danger for the hedger. It's not always better to have a perfect hedge than a flawed one. It simply makes the result more certain. Think about a business that manages its exposure to asset price fluctuations.
How can risk be reduced with options and futures contracts?
Options trading provides a practical tool for investors to protect their portfolio from unexpected price drops. A trader can lower their risk exposure and make sure they can still sell their assets at a fair price even if the market moves against them by making an investment in long-term put options.
To Know more about price fluctuations.
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