An Investor is short of cash, but still wants to have same market exposure as Fund A (with 20% large cap equities and 80% U.S. treasury bonds). Is the below strategy True or False: He could invest 20% in large cap equity future contracts and 80% in the Treasury bond futures contract to achieve same market exposure as Fund A
Incorrect you need to take into the differences of the future contract beta/duration on fund A’s beta/duration. i.e. i portfolio beta is 1.5 and futures beta is 1.25 you’ll have to comit more.
that’s correct, s23dino