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MathewsLin
10-06-2015, 11:34 AM
Dear All,

To answer the question of how to hedge the 3 shocks, here is my 2 cents.

Equity level: Long forward on the underlying that is mature at the date of sale, to guarantee the level of initial price of fund. When equity goes down 1%, which is $1,000 in our case, then the cost of hedging goes up by $540 in my case.

When they ask "if the company chooses to hedge all three market risks, what type of instrument would they need to buy?"

I am no expert in financial instrument, so any suggestions?

Can I just buy 3 independent ones, say long a forward, long a interest swap, and long a volatility swap(is there even something like this?) ?

Any comment is welcome and appreciated.