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What is optimal hedge ratio

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A spice company requires 15 MT of turmeric powder in the month of september. A september contract is available for coriander with each contract of 15 MT. If the prices of turmeric & coriander has 90 percent correlation and the standard deviation of spot price of turmeric and future price of coriander is 3 percent and 6 percent respectively. Then what is their optimal hedge ratio?

Reference no: EM133233700

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