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Feedback for A trader dealing in US crude oil wants to hedge his exposure and is looking for opportunities to hedge. He founds that only available contract with maximum correlation of with the underlying asset is Middle East crude oil contract for hedging. It has a standard deviation of monthly change in price of $1 and US crude oil has a standard deviation of $1.3. Correlation between these is 1.1. Calculate hedge ratio?

how is correlation 1.1

 

Location: Quiz B3C08 Using Futures for Hedging

how is correlation 1.1

 

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