Python for Finance

6. If we want to hedge our $5 portfolio, we should short n futures
contracts. For the specification, see http://www3.canisius.
edu/~yany/doc/sp500futures.pdf:
Chapter 10
Here, Vp is the portfolio value, βp is the portfolio beta, and the index level is
the S&P500 index level. Applying the preceding formula, we should short
ten futures contracts. Assume, in three months, it is 2090.4, that is, ten points
down. Since we know that beta is a measure of market risk, assume that
annul risk-free rate is 1%, that is, 0.25% for three months.
2. Estimate the portfolio beta by applying the following linear regression:
3. Identify several moments when the market falls dramatically.
You can use a business cycle Python dataset called:
import pandas as pd
x=pd.read_pickle("c:/temp/businessCycle.pkl")
print(x.head())
print(x.tail())
date
1926-10-01 1.000
1926-11-01 0.846
1926-12-01 0.692
1927-01-01 0.538
1927-02-01 0.385
cycle
date
2009-02-01 -0.556
2009-03-01 -0.667
2009-04-01 -0.778
2009-05-01 -0.889
2009-06-01 -1.000
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