because of the presence of basis risk. Similarly, if the number of shares held is not an integer multiple of
the number of shares underlying the futures, there will be a basis risk, and perfect portfolio insurance
will not be possible.
You want to buy Tata Chemicals shares, which are selling at INR 250 on March 22. Tata Chemicals futures have a con-
tract size of 1,350 shares, and the futures price of April futures with expiry on April 30 is INR 252.48. e risk-free rate
is 9%. You decide to insure your portfolio. Explain how you would proceed and what the insured portf ...
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