Generous Dynamics maintains an inventory of 4000 ounces of gold. The company is interested in protecting the
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Generous Dynamics maintains an inventory of 4000 ounces of gold. The company is interested in protecting the inventory against daily price changes. The correlation of the daily change in the spot and futures price is 0.4, the standard deviation of the daily spot price change is 26 percent, and the standard deviation of the daily change in the futures price is 14 percent. The futures contract size is 1000 ounces. How many contracts should GD buy or sell to hedge its inventory?
Sell 0.86154
Buy 2.9714
Sell 2.9714
Buy 0.86154
Related Book For
Business Statistics a decision making approach
ISBN: 978-0133021844
9th edition
Authors: David F. Groebner, Patrick W. Shannon, Phillip C. Fry
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