(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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