Question 17: A fuel firm expects to hedge the exposure of the currency risk. The...
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Question 17: A fuel firm expects to hedge the exposure of the currency risk. The correlation coefficient between the prospect of crude oil and the fuel's spot price is 0.69. The standard deviation of crude oil futures contract is 6.17% and the standard deviation of the spot price of fuel is 3.22%. Determine the minimum variance optimal hedge ratio? A: The optimal hedge ratio is 0.18. B: The optimal hedge ratio is 0.45. C: The optimal hedge ratio is 0.36. D: The optimal hedge ratio is 0.27
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