You are a spot hops trader for Budweiser and you are trying to hedge your hops price risk. There is no futures contract for hops so you use a barley futures contract as your hedge instrument. Through your calculations you find standard deviation of spot hop prices is = 0.30 and the volatility of the barley futures contracts over the same period is =0.12. The correlation of the two changes in prices is = 0.66. What is the optimal hedge ratio?

• A. can not tell from the given information

• B. 1.65

• C. 0.41

• D. 0.75

You are a spot hops trader for Budweiser and you are trying to hedge your hops price risk. There is no futures contract for hops so you use a barley futures contract as your hede instrument. Through your calculations you find standard deviation of spot hop prices is 30 and the volatilty of the barley futures contracts over the same period is :12. The correlation of the two changes in price is -066. What is the optimal hederatio? OA 0.41 B. can note from the given information C.0.75 D. 1.65