Question: How does one obtain the optimal hedge ratio from knowledge of daily price changes in spot and futures markets? What is tailing the hedge in

How does one obtain the optimal hedge ratio from knowledge of daily price changes in spot and futures markets? What is tailing the hedge in the context of minimum

-

variance hedging? Why does one tail the hedge? In the presence of basis risk, is a one

-

for

-

one hedge, i

.

.,

a hedge ratio of

1,

always better than not hedging at all?

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