Financial Risk Manager Part 1

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Explanation:

To reduce a portfolio's beta, you take a short position in stock index futures.

The number of contracts is:

N = \frac{(\beta_P - \beta_T) V_P}{\text{futures contract value}}

Here, the beta reduction needed is:

1.20 - 0.30 = 0.90

Using the implied contract notional of about `$300`,000 per E-mini Nasdaq-100 futures contract, the hedge requires:

N = \frac{0.90 \times 10{,}000{,}000}{300{,}000} = 30

So the correct action is short 30 contracts.

Explanation:

To reduce a portfolio's beta, you take a short position in stock index futures.

The number of contracts is:

N = \frac{(\beta_P - \beta_T) V_P}{\text{futures contract value}}

Here, the beta reduction needed is:

1.20 - 0.30 = 0.90

Using the implied contract notional of about `$300`,000 per E-mini Nasdaq-100 futures contract, the hedge requires:

N = \frac{0.90 \times 10{,}000{,}000}{300{,}000} = 30

So the correct action is short 30 contracts.

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MManit

Last updated: April 18, 2026 at 11:32

Long 15 contracts

0.0%

Short 5 contracts

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Short 30 contracts

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Short 120 contracts

33.3%