Applications of equity derivatives to portfolio management

Abstract

This article provides real-world applications of equity derivatives in portfolio management, providing a practical approach that transcends the theoretical focus often found in academic literature and derivatives textbooks. The three primary applications include using stock index futures for effective liquidity management, employing cash equitization strategies with futures to optimize cash holdings, and utilizing options to assess and manage event-driven market risks. Each application provides detailed real-world cases, demonstrating how these derivatives serve as essential tools for portfolio managers in enhancing performance and aligning with strategic investment goals.