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Wester Energy Inc. plans to buy 1 0 million barrels of crude oil next month and decides to hedge their position using crude oil futures.
Wester Energy Inc. plans to buy million barrels of crude oil next month and decides to hedge their position using crude oil futures.
From historical data we know that sigma F sigma S and rho
Find out the Optimal Hedge Ratio.
If the size of one futures contract of Oil is barrel then find out the optimal number of contracts assuming no daily settlement
The spot price is $ per barrel and the futures price is $ per barrel. Find out the optimal number of contracts after tailing.
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