You use silver wire in manufacturing. You are looking to buy 100,000 oz of silver in three

Question:

You use silver wire in manufacturing. You are looking to buy 100,000 oz of silver in three months’ time and need to hedge silver price changes over these three months. One COMEX silver futures contract is for 5,000 oz. You run a regression of daily silver spot price changes on silver futures price changes and find that 

image

What should be the size (number of contracts) of your optimal futures position? Should this be long or short?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: