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A company wishes to hedge its exposure to a new fuel whose price changes have a 0.8 correlation with gasoline futures price changes. The new
A company wishes to hedge its exposure to a new fuel whose price changes have a 0.8 correlation with gasoline futures price changes. The new fuel's price change has a standard deviation that is 60% greater than price changes in gasoline futures prices. Gasoline futures are used to hedge the exposure. The company has an exposure to the price of 100 million gallons of the new fuel. Each futures contract is on 42,000 gallons. How many gasoline futures contracts should be traded?
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