a) Consider the derivation of the optimal hedge ratio in the context of cross hedging. Please define the formula denoting the total variance of the component AS - hAF and define the components of the equation in words. [5 marks] b) Express graphically the total variance defined in part a) as a function of the hedge ratio h. Please label the axes and specify on the graph the point, where h* (optimal hedge ratio) is located. [5 marks] c) "If there is no basis risk the minimum variance hedge ratio is always 1". Is this statement true or false? Explain your answer in brief. [10 marks]