Hey Monkeys,
Need some advice.
Topic introduction: I am currently an analyst at an investment consulting firm, and I have to develop a hedging strategy for a big pension fund. Even though I already got the strategy designed, I am trying to improve it as much as possible and thus, I am sure asking WSO can provide some improvement. The aim is to design a strategy to hedge equity risk in Eurostoxx and S&P 500.
Question: I am assuming hedging 100% of the exposure is not cost efficient (based on different analysis, research etc.) and my decision is to hedge 50% of the exposure. From this point, the question is: what is better, hedging 100% with options? Some part with options and the other with forwards and futures? Or 100% forwards and futures? Additionally, should the contracts expire in one year? Or better do it quarterly and then roll them up? And finally, should the % be split, meaning that hedging 5% in January, then 5% more in February etc. or all at the same time?
Finally, it would be awesome if anyone had an excel model that takes into account those variables ( I could exchange it for DCF, peers, precedent, LBO, asset allocation, factor analysis, capm… models)
Any feedback is welcome
Hi Pictet, hope I can help. Do any of these links cover what you're looking for:
You're welcome.
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