Fin485 Derivatives Project Paper

Topics: Futures contract, Capital asset pricing model, Altera Pages: 3 (1250 words) Published: May 2, 2013
Marijan Jurac


Professor Chelikani

19 April 2013

Review of Hedging Process on Portfolio
The six stocks that I used to create my portfolio included Altera Corporation, Cabot Oil & Gas Corp., Dominion Resources, FMC Corporation, Chevron Corporation, and Nike Inc. Each of my stocks had weights, which I distributed for my $100,000. 20% of the $100,000 went towards Altera Corp., 15% to Cabot Oil $ Gas Corp., Dominion Resources, and Nike Inc. Finally I allocated 10% towards FMC Corp. and 25% towards Chevron Corporation. The stocks that I chose were intended to make my portfolio as diversified as possible so that I could receive high returns. I found that Dominion (D) Resources was the most steady and reliable investment from the six stocks in the portfolio. Altera (ALTR) was the one of the smaller investments with the smallest daily returns out of the six stocks, it performed consistently, however, was the only stock in the portfolio that finished the time period with a smaller daily return compared to a year prior (3/1/12).

To begin my project I first found the daily prices for my 6 stocks from March 1st 2012 – March 1st, 2013. To find these I used the Bloomberg Terminal as a search engine and then also found the S&P 500 historical futures prices for the same period as for the 6 stocks. After finding these daily returns I then allocated my weights dividing them up throughout my $100,000 of capital. After allocating my weights I then calculated my number of shares for each stock by dividing the 3/1/2013 stock price to the amount of capital that was divvied up through the weights given. For example, if the weight for Altera Corp. was 20%, that would mean that 20,000,000 was invested. From that 20,000,000 Altera’s stock price on 3/1/13 is divided by the $20,000,000 leaving me with 573,221 shares purchased. After I did this calculation for all 6 of the stocks, I found the value of my portfolio through multiplying each...
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