portfolio value is $15, which results in portfolio weights of 10/15 (equity position 1), V15 (equity position 2) and 3/15 (cash). Cash is taken as riskless, so adding cash to a portfolio lowers its absolute risk (volatility) since it reduces the amount (weight) of the risky positions. In the previous example, the weights in the two equity positions decreased by \6 and V30. Note that although cash is a risk-less asset, it can increase risk when a portfolio's performance is measured against a benchmark and the benchmark portfolio holds risky assets. The impact of cash on a portfolio's tracking error is explored on page 390. Futures When measuring risk, futures should be treated as distinct assets. In this section, our focus is on equity index futures. As explained earlier, futures are composite assets as their value is derived from an underlying asset(s). Take the example of a futures contract on the S&P 500. The return on this contract is a function of the return on the S&P 500 index that in turn is a function of returns on the assets which comprise the S&P 500. An equity index futures exposure is its contract value. Its contract value is defined as the contract size times the index value. For example, the contract size of a June 2002 S&P 500 futures contract on March 21, 2002, was approximately $286,950. This is equal to the value of 1 point ($250) times the index's market value on that date (1,147.80). The exposure of holding 10 futures contracts would be $2,869,500. The weight of the equity index future is given by ratio of its total exposure (e.g., $2,869,500) divided by the total market value of the portfolio. Note that the exposure is not the same as the futures market value. The futures total exposure is never incorporated in the computation of the portfolio's total market value. ADRs and GDRs When evaluating the risk of American and global depositary receipts, some portfolio managers prefer to map these securities to their underlying parent companies. In other words, the exposures of the ADR or GDR are replaced by the exposures of the parent company. For example, suppose a portfolio held the BP Amoco ADR but not its parent (i.e., BP Amoco shares traded in the United Kingdom). In this situation, the ADR's exposures will be replaced by the parent company's exposures. The mechanics of mapping an ADR or GDR to its parent can be described in three steps. First, compute the portfolio weights of the ADR. Second, if the portfolio has positions in both the ADR and the parent company, compute the portfolio weights of both and combine them to get an aggregate weight. Third, use the parent company's exposures to represent the exposure of the aggregate position (i.e., the position that contains both the ADR and the parent). One potentially important drawback to mapping an ADR to its parent involves currency risk. Suppose a portfolio with a base currency in British pounds holds shares in a stock that is traded locally in Russia. In addition, this portfolio manager holds the ADR of this company. Without combining positions, this portfolio would have two types of exchange rate risk-to the Russian ruble and to the U.S. dollar. By mapping the ADR to the parent company, the portfolio reduces its dollar exposure and increases its currency risk to the Russian ruble. Currencies A portfolio's currency positions are derived from the quantity of shares of a particular asset that is held as well as any direct currency exposure. For