How Is a Hedge Ratio Commonly Determined

question 12

Multiple Choice

How is a hedge ratio commonly determined?

• A)By discounting the optimal number of futures to sell per $1 of cash position using the yield involved.
• B)By using the ratio of the most recent spot and futures price changes.
• C)By running an ordinary least squares regression of changes in spot prices on changes in futures prices.
• D)By using the conversion factor.

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