Investments, tenth edition

 Figure 22.4 

Hedging revenues using futures, Example 22.5 (Futures price  5  $91.86) 

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P A R T   V I

  Options, Futures, and Other Derivatives

 Exact futures hedging may be impossible for some goods because the necessary futures 

contract is not traded. For example, a portfolio manager might want to hedge the value 

of a diversified, actively managed portfolio for a period 

of time. However, futures contracts are listed only on 

indexed portfolios. Nevertheless, because returns on the 

manager’s diversified portfolio will have a high corre-

lation with returns on broad-based indexed portfolios, 

an effective hedge may be established by selling index 

futures contracts. Hedging a position using futures on 

another asset is called  cross-hedging.