If the minimum-variance hedge ratio is calculated as 1.0, the hedge must be perfect. Is this statement

Question:

“If the minimum-variance hedge ratio is calculated as 1.0, the hedge must be perfect." Is this statement true? Explain your answer.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Fundamentals of Futures and Options Markets

ISBN: 978-0132993340

8th edition

Authors: John C. Hull

See More Books

Question Posted: Jan 20, 2016 08:45 AM

See More Questions

If there is no basis risk, the minimum variance hedge ratio is always 1.0." Is this statement true? Explain your answer.
Suppose you are concerned about your firm's jet fuel exposure. Further, your analysis suggests the best futures contract to hedge jet fuel is unleaded gasoline. The fuel volatility (standard...
Suppose you are a dealer in sugar. It is September 26, and you hold 112,000 pounds of sugar worth $0.0479 per pound. The price of a futures contract expiring in January is $0.0550 per pound. Each...
Your company has just been names in as a defendant in a lawsuit because of an accident. The plaintiff is suing for $400,000 in damages. You have contacted legal counsel and the attorneys have advised...
What is the difference between a discrete and a continuous distribution?
Find the length of the curve with the given parametric equations (a) x = sin Î¸, y = cos Î¸ for Î¸ ¤ Î¸ ¤ 2Ï (b) x = sin...
Describe as many types of resource allocation problems as you can, based on the situations described in LO6 the chapter.
Kimbrells Furniture Co. sold a new television set and tape player to Charlie ONeil and his wife. Each purchase was on credit, and in each instance, a security agreement was executed. Later on the...
In 2021, Lucy and Evan Stuart have a daughter who is 2 years old. The Stuarts are full-time students and they are both 24 years old. Their AGI is $16,000, consisting of $10,100 of lottery winnings...
1. What are pros and cons of Apples tight control of licensing? 2. What role has ecosystem played in Apples competitive advantage?
Suppose that in Example 3.4 the company decides to use a hedge ratio of 0.8. How does the decision affect the way in which the hedge is implemented and the result?
For an asset where futures prices are usually less than spot prices, long hedges are likely to be particularly attractive." Explain this statement.
Describe the x-values at which f is differentiable. f(x) = (x + 4)2/3 H -6 -4 H - 2 4 y -2 + X
1. How will you check if a class is a child of another class? 2. What is init method in python?
1. What are lists and tuples? What is the key difference between the two? 2. What is Scope in Python?
1. What is an Interpreted language? 2. What is a dynamically typed language?
Q.1 If denotes increasing order of intensity, then the meaning of the words [talk shout scream] is analogous to [please pander]. Which one of the given options is appropriate to fill the blank? (A)...
Gordon Grumps is married and files separately. During 2019, he had the following capital gains and losses: Gordons taxable income is $6,000. What is Gordon's capital loss deduction for 2019 and his...
Determine the reactions in supports A and D and connections B and C. Sketch its shear and moment diagram and determine the magnitude ankoration of the maximum shear and moment for every member. 18 3...
What type of leadership style should a woman running a secretarial pool utilize? Relate your conclusion to leadership theory.
A two-month American put option on a stock index has an exercise price of 480. The current level of the index is 484, the risk-free interest rate is 10% per annum, the dividend yield on the index is...
How would you use the control variate approach to improve the estimate of the delta of an American option when the binomial tree approach is used?
Estimate delta, gamma, and theta from the tree in Example 18.1. Explain how each can be interpreted.
Your firm is planning to invest in an automated packaging plant. Harburtin Industries is an all - equity firm that specializes in this business. Suppose Harburtin ' s equity beta is 0 . 8 7 , the...
Ned Allen opened a medical practice in Los Angeles, California, and had the following transactions during the month of January. (Click the icon to view the January transactions.) Journalize the...
do you need more information or are you working on this? Irene Watts and John Lyon are forming a partnership to which Watts will devote one- half time and Lyon will devote full time. They have...

If the minimum-variance hedge ratio is calculated as 1.0, the hedge must be perfect. Is this statement

Question:

Step by Step Answer:

The statement is not tru...View the full answer

Fundamentals of Futures and Options Markets

Students also viewed these Corporate Finance questions