Question: The hedge ratio for a hedging with maturity or underlying mismatch should be obtained by running regression. The hedge ratio is the correlation between spot

The hedge ratio for a hedging with maturity or underlying mismatch should be obtained by running regression. The hedge ratio is the correlation between spot price and future price. True False

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

When WTI crude oil price droped to negative 37 dollars in April 2020, we should have been paid when refilling our cars. If not, then the market was not efficient. True False If the underling is a...

In finance we are sometimes interested in hedging the risk associated with future price changes by using futures contracts. A futures contract allows the buyer of the contract to buy the commodity at...

Which of the following is correct? To determine the optimal hedge ratio, one needs to use the correlation between the changes in the futures price and the changes in the spot price of the asset...

Explain whether option C is correct or not? Minimum Variance Hedge Ratio t = time at which hedge is put in place t = time at which hedge is closed out Sti spot price of asset being hedged at time t;...

answer this question useing Emaar information: 1. Briefly explain the different types of investment companies make in the securities of other companies. 2. Locate a recent annual report of a public...

Estimate the optimal hedge ratio using regression analysis using close price data from the beginning of the sample period until July 5, 2024. Use price changes in your model. Tabulate the estimated...

Consider a stock with standard deviation of price changes of 3% and standard deviation of forward price changes of 5%. The correlation between the two price changes is -0.45. If a hedge ration of...

What factors should be considered in deciding whether the cost of capital for a foreign affiliateshould be higher, lower, or the same as the cost of capital for a comparable domestic operation?...

1. Explain why MGRM wanted to offer a price guarantee on purchase contracts for its customers? 2. Describe the position that MGRM had. Why did it want to hedge its position? 3. Describe the basic...

Consider a population consisting of two types, A and B, and assume that the change in the composition of the population is determined by the average payoffs received by the two types. A-types always...

What is true about the graph of function f defined by f(x) = 4 + |||- 31 (1)Symmetric (11) Has (III) Has a y intercept at (0,7) with no respect X to y-axis intercepts

List and explain seven ( 7 ) common hardware failures. ( 1 4 Marks ) 1 . 2 List and explain seven ( 7 ) common network failures. ( 1 4 Marks ) 1 . 3 List at least thirteen ( 1 3 ) ways to identify...

identify a true statement about the production era

List the four steps in the model for giving praise.

List the criteria for setting objectives.

Describe four content motivation theories.