The hedge ratio is the number of hedging vehicles such as futures contracts required to offset the
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The hedge ratio is the number of hedging vehicles such as futures contracts required to offset the risk of the unprotected position. The hedge ratio for systematic market risk is proportional to the size and beta of the underlying stock portfolio. The hedge ratio for fixed-income portfolios is proportional to the price value of a basis point, which in turn is proportional to modified duration and the size of the portfolio. P-63
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ISE Investments
ISBN: 9781266085963
13th International Edition
Authors: Zvi Bodie, Alex Kane, Alan Marcus
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