Problem 3.1 The following table gives data on monthly changes in the spot price and the futures price for a certain commodity. You need to hedge the commodity with the futures contract and you are given some data about past price changes of the futures and the commodity. a) Use the data to calculate a minimum variance hedge ratio. b) Would you be comfortable using this hedge ratio? Give reasons. Observation 1 2 3 4 5 6 7 8 9 10 Spot Price Change +0.50 +0.61 -0.22 -0.35 +0.79 +0.04 +0.17 +0.70 -0.51 -0.41 Futures Price Change +0.56 +0.63 -0.12 -0.44 +0.54 -0.06 +0.02 +0.80 -0.56 -0.46