Assume that the risk minimizing cross-hedge ratio h is 20


Assume that the risk minimizing cross-hedge ratio (h*) is 2.0 and the correlation coefficient, ρ(DS, DF), is 1.0. The cash-flow risk per unit, σh*(π) = 0. σ(DF) must be (assume it is a forward contract, no marking to market risk) a) Zero b) 0.5[σ(DS)] c) 2[σ(DS)] d) 1.0 e) None of the above.

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Financial Management: Assume that the risk minimizing cross-hedge ratio h is 20
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