What is the optimal hedge ratio for a three-month contract


Suppose that the standard deviation of quarterly changes in the prices of a commodity is $0.65, the standard deviation of quarterly changes in a futures price on the commodity is $0.81, and the coefficient of correlation between the two changes is 0.8. What is the optimal hedge ratio for a three-month contract? What does it mean?

Request for Solution File

Ask an Expert for Answer!!
Civil Engineering: What is the optimal hedge ratio for a three-month contract
Reference No:- TGS02200998

Expected delivery within 24 Hours