Financial Risk Manager Part 1

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Explanation:

To reduce a portfolio’s beta using stock index futures, the required number of contracts is

N = \frac{(\beta_P - \beta_T) \times V_P}{F \times Q_F}

where:

Contract value:

2{,}400 \times 250 = 600{,}000

Difference in beta:

1.30 - 0.70 = 0.60

Thus:

N = \frac{0.60 \times 9{,}000{,}000}{600{,}000} = 9

Because the goal is to reduce beta, Sally should short 9 futures contracts.

Explanation:

To reduce a portfolio’s beta using stock index futures, the required number of contracts is

N = \frac{(\beta_P - \beta_T) \times V_P}{F \times Q_F}

where:

Contract value:

2{,}400 \times 250 = 600{,}000

Difference in beta:

1.30 - 0.70 = 0.60

Thus:

N = \frac{0.60 \times 9{,}000{,}000}{600{,}000} = 9

Because the goal is to reduce beta, Sally should short 9 futures contracts.

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MManit

Last updated: April 18, 2026 at 11:32

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