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What is the optimal hedge ratio

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A company plans on buying one million gallons of jet fuel in 3 months. The company chooses to hedge using the heating oil futures contract. The standard deviation is 4% for heating oil futures price and 5% for jet fuel price over the 3-month period and the correlation between jet fuel and heating oil futures price is 0.8. What is the optimal hedge ratio? Is this a perfect hedge?

Reference no: EM131412146

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