Equity Price Risk

- Definition
- Types: Stock index and Single Stock
- What is index? Stock?
- Stock price * Market capitalisation
- Hedging using index futures/ Single stock futures
- Hedge ratio (regression model and ‘formula’ method)
- Cash-and-Carry model
- Futures price= Spot price * (1+(r-d))^T-t
- Futures price = Spot price*e^(r-d)(T-t) ( Continuous compounding)
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- Basis risk (Why is not hedging strategy works perfectly?)