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Optimal Hedge Ratio Correlation Understanding
Thank you again @David Harper CFA FRM ! Those graphs are very enlightening!- materio
- Post #6
- Forum: P1.T3. Financial Markets & Products (30%)
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Optimal Hedge Ratio Correlation Understanding
Thank you @bpdulog and @David Harper CFA FRM for you answers. For what I understand, it is all about minimizing the variance of the portfolio, and I was focusing on the hedge concept. So, given the following formula for the variance of the portfolio: Of course, the best way of reducing the...- materio
- Post #4
- Forum: P1.T3. Financial Markets & Products (30%)
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Optimal Hedge Ratio Correlation Understanding
Hi, I have a doubt about the meaning of the hedge ratio. Hedge ratio = ρ * σ_spot / σ_fut Number of contracts = HedgeRatio * PortfolioValue / ValueFuturesContract Therefore, the lower the correlation, the lower the number of contracts. So, let's say that I have a portfolio of $ 1.000.000 of...- materio
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- correlation frm futures hedge hedge ratio minimum-variance-hedge ratio
- Replies: 5
- Forum: P1.T3. Financial Markets & Products (30%)