Target beta
Definition · Level 9 · Risk & portfolio
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The market sensitivity you want after hedging. Contracts to sell = (starting beta − this beta) × portfolio value ÷ (futures price × multiplier).
Example
$5M at β 1.2, target 0.4, $250,000 per contract → 16 contracts.
Where Tradecraft teaches it
Level 9 · Risk & portfolio, in the lesson “Beta hedges: full and partial”: Size a futures hedge to a target beta, and work out what risk a partial hedge leaves on.
Related terms
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- Partial hedgeA hedge that offsets only part of an exposure, leaving some of it on.
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- AlphaReturn earned above what the asset’s market exposure predicts: Rp − [Rf + β(Rm − Rf)].
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