Series 3: 3.2.1. Portfolio Beta And Hedge Ratio

Taken from our Series 3 Online Guide

3.2.1. Portfolio Beta and Hedge Ratio

With regard to stock index futures, deciding how many futures contracts to buy or sell depends as much on the risks in one’s portfolio of underlying stocks as on its size. But understanding portfolio risk is no simple matter. Before launching into the subject of finding a proper hedge ratio, we must introduce a few new terms and concepts.

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