Which of the following is correct? To determine the optimal hedge ratio, one needs to use...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Which of the following is correct? To determine the optimal hedge ratio, one needs to use the correlation between the changes in the futures price and the changes in the spot price of the asset underlying the futures contract. The optimal hedge ratio is always 1 if there is no asset mismatch None of the other statements is correct. The optimal hedge ratio is always 1 if changes in the spot price are perfectly correlated with changes in the futures price. More than one of the other statements is correct. O Which of the following is correct? To determine the optimal hedge ratio, one needs to use the correlation between the changes in the futures price and the changes in the spot price of the asset underlying the futures contract. The optimal hedge ratio is always 1 if there is no asset mismatch None of the other statements is correct. The optimal hedge ratio is always 1 if changes in the spot price are perfectly correlated with changes in the futures price. More than one of the other statements is correct. O
Expert Answer:
Related Book For
Statistics for Business Decision Making and Analysis
ISBN: 978-0134497167
3rd edition
Authors: Robert A. Stine, Dean Foster
Posted Date:
Students also viewed these economics questions
-
What happens to the hedge ratio, if the correlation between the price movements of the underlying asset and the futures price is zero.
-
What happens to the audit report if there is a question about the clients ability to continue as a going concern?
-
What happens to the monopsony equilibrium if the minimum wage is set slightly above or below the competitive wage?
-
One of the most common reasons why projects undergo scope changes is: A. Poor work breakdown structure B. Poorly defined statement of work C. Lack of resources D. Lack of funding
-
Picard's method for solving the initial-value problem y' = f (t, y), a t b, y(a) = , is described as follows: Let y0(t) = for each t in [a, b]. Define a sequence {yk(t)} of functions a. Integrate...
-
What will the following program display? def main (): X = 1 y = = 3.4 print (x, y) change_us (x, y) print (x, y) def change_us (a, b): a = 0 b = 0 print (a, b) main()
-
A batch distillation facility has a bank of columns of Type 1 and another bank of Type 2. Type 1 columns are available for processing \(6,000 \mathrm{hr} /\) week, and Type 2 columns are available...
-
H&Y Drug Corporation manufactures most of its three pharmaceutical products in India. Inventory balances for March and April follow. During April, purchases of direct materials, which include natural...
-
Explore the application of advanced fluid dynamics concepts in aerodynamics and hydrodynamics, analyzing the principles of lift, drag, and thrust, and discussing the design and optimization of...
-
This case study requires you to use double entry manual recording to record transactions for September 2020. It covers many of the common transactions of everyday business, including GST.General...
-
A local university has a goal of raising $500,000 for an escrow account. Their fund-raising committee has committed to raising $5,000 a month until they reach their goal. These funds are deposited...
-
Explain the essential role of memory deallocation. Describe the function of complex memory allocation methods. Assess the page allocation methods. Describe the differences between associative memory...
-
A clean wooden box of mass 29[kg] is resting on a clean wooden surface. A person is pushing the box with an increasing force. The force slowly grows from 0, until the force reaches a maximum of 50...
-
Question 3 Consider a medical match problem with three hospitals, h1, h2 and h3, and four doctors d1, d2, d3 and d4. The capacities are 9h = 2 and 9h3 1, 9h2 = 1. The preferences = are given by the...
-
York's outstanding stock consists of 90,000 shares of noncumulative 7.5% preferred stock with a $5 par value and also 270,000 shares of common stock with a $1 par value. During its first four years...
-
Wilde's Bramble is an organic food company started by a couple who grew up in rural Vermont, Alder and Calla Wilde. Living on a small farm created with tracts of land from both sets of parents, the...
-
Proving Substitution Effect & Income Effect. " Given your existing income, you spend all of your income for 2 goods, i.e. petrol (gasoline) for car and the remaining balance on other goods" 1) What...
-
Uniform electric field in Figure a uniform electric field is directed out of the page within a circular region of radius R = 3.00 cm. The magnitude of the electric field is given by E = (4.50 x 10-3...
-
Match each definition on the left with a mathematical expression or term on the right. Avoids confounding in a two-sample comparison (a) t = -4.6 (b) t = 1.3 (c) µ 1 µ 2 (d) (e) n - 1 (f)...
-
From looking at this plot of the residuals from a linear equation, estimate the value of se. Micrasan Eicei $100.00 $75.00 4. $sa.00 $25.00 10 50.00 11 12 (525.00) 13 14 15 16 17 (550.00) (S75.00) 18...
-
Mark each statement True or False. If you believe that a statement is false, briefly explain why you think it is false. Sampling variation occurs when respondents change their answers to questions...
-
Adelio Garcia owns an industrial equipment company named Get Smart Industrial that sells three products in the oil services industry, using a direct sales force to do so. Adelio wants to grow the...
-
Is it possible to classify most firms as rapid-growth firms? Explain your answer.
-
Three years ago, Sarah Jeffers launched her graphic design company. She spends 12 hours a day at work micromanaging every aspect of her business, yet it is still not growing. Using materials from...
Study smarter with the SolutionInn App