ManagementParadise.com : Worlds Leading Management Portal. MBA | Classroom, Boardroom and Beyond


Go Back   ManagementParadise.com Forums - Your MBA Online Degree Program and Management Students Forum for MBA,BMS, MMS, BMM, BBA, students & aspirants. > Projects HUB for Management Students ( MBA Projects and dissertations / BMS Projects / BBA Projects > Resolve Your Query - Get Help and discuss Projects > Financial Management ( FM )

How does a fund manager use these futures and options contracts as a risk management

How does a fund manager use these futures and options contracts as a risk management

Discuss How does a fund manager use these futures and options contracts as a risk management within the Financial Management ( FM ) forums, part of the Resolve Your Query - Get Help and discuss Projects category; Broadly, if a funds manager holds an equity portfolio and expects the market to decline, he can sell the index ...

Reply

 

LinkBack Thread Tools Display Modes
Advertisements
How does a fund manager use these futures and options contracts as a risk management
Old
 (1 (permalink))
Sunanda K. Chavan
sunandaC has a spectacular aura aboutsunandaC has a spectacular aura aboutsunandaC has a spectacular aura about
 
sunandaC
Management Paradise Guru
 
Status: Offline
Posts: 6,685
Join Date: Jul 2010
How does a fund manager use these futures and options contracts as a risk management - October 18th, 2010

Broadly, if a funds manager holds an equity portfolio and expects the market to decline, he can sell the index futures at the current price for future delivery. if the market did decline, his equity portfolio value will come down, but his futures contract will show corresponding profit, since he had sold it at the higher past price.

this is called “hedging” portfolio risk. in this case, the fund manager would not have any loss due to market decline. however, contrary to the expectations, if the market prices actually rose, our fund manager will not gain. the rise in his equity portfolio value will be neutralized by the loss on his futures position, since he had sold futures at lower price relative to the current market levels.

Options, too, can be used to hedge an investment portfolio – by buying put options (or options to sell underlying asset) at a price (the premium). The funds manager can exercise the option only if the prices fall, since he has the right to sell at a higher price. he can forgo the premium and not exercise the option, if the prices actually rise. This way he can still let his portfolio NAV, while protecting the downside risk.
Advertisements
Friends: (0)
Reply With Quote
Related to How does a fund manager use these futures and options contracts as a risk management
 

Similar Threads

Thread Thread Starter Forum Replies Last Post
FUTURES CONTRACTS Sunanda K. Chavan Financial Management ( FM ) 0 October 8th, 2010 05:30 PM
Pricing futures contracts on commodities Sunanda K. Chavan Financial Management ( FM ) 0 October 1st, 2010 04:17 PM
Forward contracts & Futures & Options Sunanda K. Chavan Financial Management ( FM ) 0 October 1st, 2010 03:36 PM
Index Futures Contracts and Index Option Contracts Abhijeet S Financial Management 0 September 1st, 2010 08:43 PM
Options Contracts writer11 Stock Markets Tips & Gyan !! 0 September 28th, 2009 03:07 PM
 

Reply

Bookmarks

Tags
contracts, fund, futures, management, manager, options, risk

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Trackbacks are On
Pingbacks are On
Refbacks are On


Login
Forgot Password?  New User?
  

» Ads





» Recent Threads

Discussion about...
Last post by Murgha Joshi
3 Minutes Ago 01:44 PM
0 Replies
Today's Top Discussions...
Last post by Murgha Joshi
9 Minutes Ago 01:38 PM
0 Replies
5 Discussion about...
Last post by Murgha Joshi
18 Minutes Ago 01:29 PM
0 Replies
Are you crazy for...
Last post by Murgha Joshi
38 Minutes Ago 01:09 PM
0 Replies
8 Discussion about...
Last post by Murgha Joshi
49 Minutes Ago 12:58 PM
0 Replies
Hot Discussion going on...
Last post by Murgha Joshi
58 Minutes Ago 12:50 PM
0 Replies
Why Everyone is Talking...
Last post by Murgha Joshi
1 Hour Ago 12:32 PM
0 Replies
Epic Research Update :...
Last post by Epic Research
1 Hour Ago 12:22 PM
0 Replies
Why #NewStarWarsSpo...
Last post by Murgha Joshi
1 Hour Ago 12:21 PM
0 Replies
Epic Research Update :...
Last post by Epic Research
1 Hour Ago 12:17 PM
2 Replies
Top Most Discussion...
Last post by Murgha Joshi
1 Hour Ago 12:14 PM
0 Replies
What is #WinGOSF14 and...
Last post by Murgha Joshi
1 Hour Ago 12:07 PM
0 Replies
Epic Research Update :...
Last post by Epic Research
1 Hour Ago 12:05 PM
2 Replies
List of CAT / MBA...
Last post by Shreya Das
2 Hours Ago 10:48 AM
2 Replies
What is new in GRE?
Last post by Priya Mathur
3 Hours Ago 10:23 AM
4 Replies

» Projects Helpline

No Threads to Display.

» THE BIG FIGHT

ManagementParadise.com is not responsible for the views and opinion of the posters. The posters and only posters shall be liable for any copyright infringement.


Management Paradise
About Us
Press
Jobs
Contact Us
Kartik Raichura
Legal
Terms & Conditions
Privacy Policy
Disclaimer
Copyrights
Help
Zeitgeist
Support
FAQs
Tour
Feedback
Partners
Follow
Copyright © 2004 - 2013 Management Paradise. Site Developed by Available.co.in