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2. The jet fuel price at refinery is 300 US cents/gallon. An airline wants to hedge the risk of rising price in 3 months time
2. The jet fuel price at refinery is 300 US cents/gallon. An airline wants to hedge the risk of rising price in 3 months time (due to increased winter consump- tion for heating), so they buy European call options for 5000 gallons at 0.20 USD per gallon with strike price 310 US cents. Assume: 360 280 How much does the airline save by using options if the fuel price goes up? (Hint: compute the fuel cost.)
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