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Suppose the scenario that the standard deviation of semiannual changes in the price of wheat is $.79, the standard deviation of changes in the futures
Suppose the scenario that the standard deviation of semiannual changes in the price of wheat is $.79, the standard deviation of changes in the futures contract on wheat over the same time period is $.93, and the correlation coefficient relating the asset and futures contract is .86. What is the optimal hedge ratio for the six month contract on wheat? Describe the significance of this. Please show work.
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