Question: JET FUEL EXAMPLE Should JetBlue continue using WTI as an oil benchmark for its crude oil hedges or switch to Brent? Quantify your answer using

JET FUEL EXAMPLE

Should JetBlue continue using WTI as an oil benchmark for its crude oil hedges or switch to Brent? Quantify your answer using the 2007 to 2011 historical data provided in case Exhibit 6.

For quantifying your answer more precisely;

Use the monthly price of jet fuel, WTI and Brent between 2002 to 2011.

Run a regression on monthly price changes and find out and compare the hedge effectiveness of WTI and Brent (see Hull Chapter 3, Cross Hedging for the details of the analysis)

Calculate the optimal hedge ratio for each hedging alternative (WTI and Brent)

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