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Practice 1: An airline is going to purchase 2 million gallons of jet fuel in one month. There is no jet fuel futures contract, but
Practice 1: An airline is going to purchase 2 million gallons of jet fuel in one month. There is no jet fuel futures contract, but there is a home heating oil contract. Presumably, the two assets are fairly highly correlated. 1) Airline purchases 2 million gallons jet fuel in one month and hedges with heating oil futures. 2) From historical data Of =0.0313, os = 0.0263, and p= 0.928, please find the optimal number of contracts for hedging strategy
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