Scenario: Suppose you are a risk management professional working for risk managing firm which islocated in Dubai. risk managing firm provides consulting services to firms such as airlinecompanies and mining companies on their risk management. Mr. Abdul, the treasurer of goil Pte Ltd, approaches you today (assume it is now July 2020) to ask you for advice onthe financial risk management of his company. Goil (Dubai) Pte Ltd is a trading company which specializes in international trade of petrochemicals and petrochemical equipment. In recent years, Goil mainly deals in crudeoil, gasoil, diesel oil and fuel oil, with plans to increase its size and valuation over the next few years. Goil is a growth company that aims to a growing cash flow from expanding oiltrading operations. As a growth company, Gemoils revenue is positively related to oil priceand it aims to a growing cash flow from expanding oil trading operations and seeking to define up to 20 million gallons of jet fuel in December. The companys profit and loss are subject to many risk factors, such as the price change of oiland foreign exchange rate fluctuations. As the market price of oil is quite volatile, thecompany is considering using some strategies to manage its risk exposure. One way to hedgethese exposures is to use futures contracts. For instance, the futures contracts traded in the NYMEX.

How many heating oil futures contracts should be traded in order to achieveoptimal hedging? (Assuming with tailing adjustment)3) Please devise a hedging strategy for Goil: