Q$1.$ Delta Hedge

Columns K$-$M contain the data in Exhibit $5$ of Dozier Case A$.$ Since forward and futures prices are $($almost$)$ identical in theory, assume that the $3-$month forward rates shown there are the $3-$month futures prices $($assume CME$-$the contract size is $62,500).$ Advise Rothschild on delta hedge following the steps below:

a$)$ Add a new sheet $($with any name$)$ and compute the time series of simple returns $($the ratio of the current price to the last price minus $1)$ on the spot rate $(A{s}_t^{\frac{S}{E}})$ and on the futures prices $(fu{t}_f^{\frac{S}{E}}.$ Note that the returms will start in the second period$).$ Regress $A_t^{\frac{S}{E}}$ on A fut $t_q^{\frac{S}{E}}$ to estimate the following relationship,

$s_t^{\frac{\text{\$}}{}}=+*fu{t}_t^{\frac{\text{\$}}{}}+{}_r$

Output the result next to the two constructed series. Report the intercept $(),$ the slope coefficient $(),$ their $t-$statistics, and the adjusted $R-$squared below by referencing the regression output. If you are unfamiliar with running regressions in Excel, see Sheet Example$\_$Reg.

$\backslash$table$[[,,,,,,],[,,,,,,],[$t$-$statistic,,,t$-$statistic,,,$],[$Adjusted R$-$squared,,,,,,$],[,,,,,,]]$

b$)$ How can Dozier delta$-$hedge its exposure from the transaction described in the case on January $14?$ Put the underlying exposure in $,$ state whether to buy or sell the futures, and compute the number of futures contracts to trade in the boxes below. Use the ROUND function to round the result to the desired unit.