medium · FRM Part 1
An airline hedges its jet fuel requirements using heating oil futures. The standard deviation of jet fuel price changes is σ_S = 0.012, the standard deviation of heating oil futures changes is σ_F = 0.015, and their correlation is ρ = 0.85. Calculate the minimum-variance hedge ratio.
- 1.06
- 0.72
- 0.68
- 0.85
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