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Posted on Aug 20, 2024

Using the regressions result answer the questions a, b, and c. a. Discuss whether differences in the hedge ratio between the two commodities will have

Using the regressions result answer the questions a, b, and c.

a. Discuss whether differences in the hedge ratio between the two commodities will have any effect on the effectiveness of the hedge. b. Recommend a convenient hedging strategy to the CFO using the data provided and explain the corresponding hedging position. c. What are the potential factors that may weaken your suggested strategy? Discuss

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D E F H J L K N M O Q S R T V w Dates Line Fit Plot A DB C 1 SUMMARY OUTPUT HO1 Comdty 2 PX_LAST 3 Regression Statistics 4 Multiple F 0.811241752 5 R Square 0.65811318 6 Adjusted I 0.656350877 7 Standard I 19.13440338 8 Observati 196 300 250 9 F Significance F 373.43925 4.303E-47 200 10 ANOVA 11 df SS MS 12 Regressio 1 136725.591 136725.591 13 Residual 194 71028.3262 366.125393 14 Total 195 207753.917 15 16 Coefficients tandard Erro t Stat 17 Intercept -2695.78956 148.575023 -18.144298 18 Dates 0.06668667 0.00345087 19.3245763 PX_LAST 150 P-value Lower 95% Upper 95% .ower 95.0%Upper 95.0% 1.152E-43 -2988.8193 -2402.76 -2988.819 -2402.7599 4.303E-47 0.05988062 0.0734927 0.0598806 0.07349272 creamos PX_LAST Predicted PX_LAST 19 100 20 21 50 22 RESIDUAL OUTPUT 23 24 Observatioredicted PX LA Residuals 25 1 129.7246638 -19.654664 26 2 130.1914705 -24.981471 27 3 130.6582772 -37.228277 28 4 131.1250839 -31.555084 29 5 131.5918906 -26.081891 0 7/15/2015 1/31/2016 8/18/2016 3/6/2017 9/22/2017 4/10/2018 10/27/2018 5/15/2019 12/1/2019 6/18/2020 Dates 30 31 32 33 6 132.0586973 -26.158697 7 132.525504 -25.595504 8 132.9923107 -30.442311 9 133.4591174 -28.339117 10 133.9259241 -17.795924 11 134.3927308 -12.592731 12 134.8595374 -10.949537 34 35 36 JETINYPR Index Sheet1 HO1 Comdty Sheet2 Sheet3 Sheet4 C01 Comdty + Ready 1 D E F F G H j - K L M N o P Q R S T U V W Dates Line Fit Plot 3 90 B C 1 SUMMARY OUTPUT C01 Comdty 2 PX_LAST Regression Statistics 4 Multiple F 0.77476171 5 R Square 0.600255707 6 Adjusted! 0.59819517 7 Standard I 7.498919652 8 Observati 196 9 80 70 F Significance F 291.3102436 1.73671E-40 60 10 ANOVA 11 df SS MS 12 Regressio 1 16381.4808 16381.4808 13 Residual 194 10909.35642 56.23379595 14 Total 195 27290.83721 15 16 Coefficients Standard Error t Stat 17 Intercept -935.105078 58.22769259 -16.0594562 18 Dates 0.023082918 0.001352424 17.06781309 50 PX_LAST P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% 1.79767E-37 -1049.94567 -820.264491 -1049.945666 -820.26449 1.73671E-40 0.020415576 0.02575026 0.020415576 0.02575026 40 PX_LAST Predicted PX_LAST 19 30 20 10 20 21 22 RESIDUAL OUTPUT 23 24 Observatioredicted PX_LA Residuals 25 1 42.91815342 -5.638153424 26 2 43.07973385 -9.529733849 27 3 43.24131427 -14.30131427 28 4 43.4028947 - 11.2228947 29 5 43.56447513 -8.824475125 30 6 43.72605555 -9.666055551 31 7 43.88763598 - 10.52763598 32 8 44.0492164 - 11.0392164 33 9 44.21079683 -9.110796827 34 10 44.37237725 -5.652377252 35 11 44.53395768 -4.143957678 36 12 44.6955381 -3.495538103 0 7/15/2015 1/31/2016 8/18/2016 3/6/2017 9/22/2017 4/10/2018 10/27/2018 5/15/2019 12/1/2019 6/18/2020 Dates JETINYPR Index Sheet1 | Hot Comdty Sheet2 Sheet3 Sheet4 C01 Comdity Sheets Sheet6 Sheet7 Ready LE + D E F H J L K N M O Q S R T V w Dates Line Fit Plot A DB C 1 SUMMARY OUTPUT HO1 Comdty 2 PX_LAST 3 Regression Statistics 4 Multiple F 0.811241752 5 R Square 0.65811318 6 Adjusted I 0.656350877 7 Standard I 19.13440338 8 Observati 196 300 250 9 F Significance F 373.43925 4.303E-47 200 10 ANOVA 11 df SS MS 12 Regressio 1 136725.591 136725.591 13 Residual 194 71028.3262 366.125393 14 Total 195 207753.917 15 16 Coefficients tandard Erro t Stat 17 Intercept -2695.78956 148.575023 -18.144298 18 Dates 0.06668667 0.00345087 19.3245763 PX_LAST 150 P-value Lower 95% Upper 95% .ower 95.0%Upper 95.0% 1.152E-43 -2988.8193 -2402.76 -2988.819 -2402.7599 4.303E-47 0.05988062 0.0734927 0.0598806 0.07349272 creamos PX_LAST Predicted PX_LAST 19 100 20 21 50 22 RESIDUAL OUTPUT 23 24 Observatioredicted PX LA Residuals 25 1 129.7246638 -19.654664 26 2 130.1914705 -24.981471 27 3 130.6582772 -37.228277 28 4 131.1250839 -31.555084 29 5 131.5918906 -26.081891 0 7/15/2015 1/31/2016 8/18/2016 3/6/2017 9/22/2017 4/10/2018 10/27/2018 5/15/2019 12/1/2019 6/18/2020 Dates 30 31 32 33 6 132.0586973 -26.158697 7 132.525504 -25.595504 8 132.9923107 -30.442311 9 133.4591174 -28.339117 10 133.9259241 -17.795924 11 134.3927308 -12.592731 12 134.8595374 -10.949537 34 35 36 JETINYPR Index Sheet1 HO1 Comdty Sheet2 Sheet3 Sheet4 C01 Comdty + Ready 1 D E F F G H j - K L M N o P Q R S T U V W Dates Line Fit Plot 3 90 B C 1 SUMMARY OUTPUT C01 Comdty 2 PX_LAST Regression Statistics 4 Multiple F 0.77476171 5 R Square 0.600255707 6 Adjusted! 0.59819517 7 Standard I 7.498919652 8 Observati 196 9 80 70 F Significance F 291.3102436 1.73671E-40 60 10 ANOVA 11 df SS MS 12 Regressio 1 16381.4808 16381.4808 13 Residual 194 10909.35642 56.23379595 14 Total 195 27290.83721 15 16 Coefficients Standard Error t Stat 17 Intercept -935.105078 58.22769259 -16.0594562 18 Dates 0.023082918 0.001352424 17.06781309 50 PX_LAST P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% 1.79767E-37 -1049.94567 -820.264491 -1049.945666 -820.26449 1.73671E-40 0.020415576 0.02575026 0.020415576 0.02575026 40 PX_LAST Predicted PX_LAST 19 30 20 10 20 21 22 RESIDUAL OUTPUT 23 24 Observatioredicted PX_LA Residuals 25 1 42.91815342 -5.638153424 26 2 43.07973385 -9.529733849 27 3 43.24131427 -14.30131427 28 4 43.4028947 - 11.2228947 29 5 43.56447513 -8.824475125 30 6 43.72605555 -9.666055551 31 7 43.88763598 - 10.52763598 32 8 44.0492164 - 11.0392164 33 9 44.21079683 -9.110796827 34 10 44.37237725 -5.652377252 35 11 44.53395768 -4.143957678 36 12 44.6955381 -3.495538103 0 7/15/2015 1/31/2016 8/18/2016 3/6/2017 9/22/2017 4/10/2018 10/27/2018 5/15/2019 12/1/2019 6/18/2020 Dates JETINYPR Index Sheet1 | Hot Comdty Sheet2 Sheet3 Sheet4 C01 Comdity Sheets Sheet6 Sheet7 Ready LE +