Solved: What is the optimal hedge ratio for three-month contract, Finance Basics

+44 141 628 6080
[email protected]

What is the optimal hedge ratio for 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 3-month contract? What does it mean?

Solution Preview :

Prepared by a verified Expert

Finance Basics: What is the optimal hedge ratio for three-month contract

Reference No:- TGS0697800

Now Priced at $5 (50% Discount)

Recommended (98%)

Rated (4.3/5)

Have a Question? (oR Write a Review)

Write atleast 100 words!!

Recent Questions Asked Finance Basics

Q : What is the increase in profit if the appropriate products

Paul Bunyon Lumber Co. produces several products that can be sold at the split-off point or processed further and then sold. The following results are from a recent period:

Q : Compute the cash payback period for the new hoist

Blue Service Center just purchased an automobile hoist for $35,000. The hoist has an 8-year life and an estimated salvage value of $3,000. Installation costs and freight charges were $3,300.

Q : Explain the accrual of interest

On January 1, Payne Company issued $200,000, 8%, 10-year bonds at face value. Interest is payable semiannually on July 1 and January 1. Prepare journal entries to record.

Q : Electron having the same momentum as a proton

A proton has 1836 times the rest mass of an electron. At what speed will an electron have the same momentum as a proton moving at 0.0016c ?

Q : What is the optimal hedge ratio for three-month contract

The coefficient of correlation between the two changes is 0.8. What is the optimal hedge ratio for a 3-month contract? What does it mean?

Q : The alvarez sale were in transit at year-end

Stallman Company took a physical inventory on December 31 and determined that goods costing $261,370 were on hand. Not included in the physical count were $32,010 of goods purchased from Pelzer Corporation, f.o.b.

Q : Problem based on geological process

Name one geological process that is responsible for the formation of earth rock type: igneous, sedimentary, and metamorphic. Give an example on Earth where each is occurring.

Q : What strategy should the beef producer follow

The producer wants to use the December live cattle futures contracts to hedge its risk. Each contract is for the delivery of 40, 000 pounds of cattle. What strategy should the beef producer follow?

Q : Complete the flexible budget performance

For example, administrative expenses should be $3,700 per month plus $43 per course plus $5 per student. The companys sales should average $880 per student.

1928224

Questions
Asked

3,689

Active Tutors

1425669

Questions
Answered

Start Excelling in your courses, Ask a tutor for help and get answers for your problems !!

ask Question

Solution Preview :

Prepared by a verified Expert

Finance Basics: What is the optimal hedge ratio for three-month contract

Reference No:- TGS0697800

Have a Question? (oR Write a Review)

Recent Questions Asked Finance Basics

Q : What is the increase in profit if the appropriate products

Q : Compute the cash payback period for the new hoist

Q : Explain the accrual of interest

Q : Electron having the same momentum as a proton

Q : What is the optimal hedge ratio for three-month contract

Q : The alvarez sale were in transit at year-end

Q : Problem based on geological process

Q : What strategy should the beef producer follow

Q : Complete the flexible budget performance

What is a behavioral indicator related to family

Review a social, behavioral, or cultural factor

Why you feel unpleasantly hot and sweaty

Examine historical literature to the most current period

How ensure that the youth understand what study involves

Describe the results, including any scores

Problem concerning consensual sexual relationship

Solution Preview :

Prepared by a verified Expert

Finance Basics: What is the optimal hedge ratio for three-month contract

Reference No:- TGS0697800

Recent Questions Asked Finance Basics

Q : What is the increase in profit if the appropriate products

Q : Compute the cash payback period for the new hoist

Q : Explain the accrual of interest

Q : Electron having the same momentum as a proton

Q : What is the optimal hedge ratio for three-month contract

Q : The alvarez sale were in transit at year-end

Q : Problem based on geological process

Q : What strategy should the beef producer follow

Q : Complete the flexible budget performance

Asked Questions