A portfolio contains equally weighted stocks (Alphabet, Boeing, Cummins and Dow Chemical) with a nominal of 100mil. The required performance is as follows.
Avg underlying fund performance:
>160% - No profit no loss
130 to 160% - flat 60% profit
100 to 130% - 2x of the long performanc
60 to 100%...
Learning objectives: Describe how hedging activities take place in practice, and describe how scenario analysis can be used to formulate expected gains and losses with option positions. Describe how portfolio insurance can be created through option instruments and stock index futures