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How to calculate the optimal hedge ratio? The optimal hedge ratio formula. using the following data. take the Portfolio Alpha in Company Alpha as an
How to calculate the optimal hedge ratio? The optimal hedge ratio formula. using the following data.
take the Portfolio Alpha in Company Alpha as an optimal hedge ratio example in calculating the metric:
- Portfolio: Portfolio Alpha;
- Standard deviation of the spot price: 0.05;
- Standard deviation of the future price: 0.072; and
- Correlation coefficient between the changes in the spot and futures prices: 0.83
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