You are hired by a large corporation as a consultant to advise on the use of derivatives to hedge commodity price risk. The analysis will involve (i) designing hedging strategies using futures contracts on the commodity being hedged, (ii) designing cross-hedging strategies using futures contracts on an alternative commodity to the one being hedged, (iii) analysing the effectiveness of the hedging strategies after those strategies have been implemented over the hedge period 16 Dec 2019 - 14 Feb 2020, and (iv) writing a report which summarises the results of your analysis and discusses any implications, issues and recommendations for future risk management activities of the company.

Answer rating: 100% (QA)

To effectively address the corporations need for advice on commodity price risk hedging using derivatives I would follow a structured approach I Desig... View the full answer