can sum1 plz help me with this question as it is a part of my assignment. thank you in advance.
well the whole idea of hedging is to reduce your exposure to some kind of risk. For example, if you are overweight equities in your portfolio relative to your benchmark or what you feel would be prudent exposure, you could hedge your exposure to a downturn in the market (you'd be hurt since you're overweight equities) by selling futures (value of short futures increases as index level falls). It works the other way with long futures giving you exposure to equity market returns.