Based on the Minimum Variance Hedge Ratio Approach,what Is the Optimal

question 42

Multiple Choice

Based on the minimum variance hedge ratio approach,what is the optimal number of futures contracts to deploy,given the following information.The correlation coefficient between changes in the underlying instrument's price and changes in the futures contract price is 0.95,the standard deviation of the changes in the underlying position's value is 300%,and the standard deviation of the changes in the futures contract's price is 11.4%.

• A)long 35 futures contracts
• B)long 25 futures contracts
• C)long 15 futures contracts
• D)short 25 futures contracts
• E)short 15 futures contracts

---

Definitions:

Lexical Approach

A method in personality psychology focusing on the analysis of language and words used to describe human traits and behavior.

Projective Tests

Psychological assessments where individuals respond to ambiguous stimuli, revealing hidden emotions and internal conflicts.

Conditions of Worth

The belief that one must meet certain standards in order to earn positive regard from others, impacting self-esteem and self-worth.

Positive Self-Regard

A person's overall subjective emotional evaluation of their own worth or the attitude towards oneself in a positive manner.