Posted: January 10th, 2022
With two business partners, you manage a small financial services firm that actively manages $40000000 in superannuation funds. The markets have been particularly volatile and your analysis suggests that there is a strong chance of a significant market correction in the short to medium term. Explain to your partners how futures contracts might be used as part of a risk management strategy and outline the steps, including the transactions involved, that your firm should take in order to hedge against the risk of a market downturn. (LO 18.3)
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