Hedge Ratio Assignment
February 27th, 2020
Using some historical data, we have found that the standard deviation of monthly changes in the price of commodity A is $0.06. The standard deviation of monthly changes in a futures price for a contract on commodity B (which is similar to commodity A) is $0.08. The correlation between the futures price and the commodity price is 0.85. What hedge ratio should be used when hedging a one month exposure to the price of commodity A? Get Finance homework help today