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In the above section, the author said the following. "The oil price declined from $89 to $86. Receiving only $1.70 per barrel compensation for a price decline of $3.00 may appear unsatisfactory. However, we cannot expect total compensation for a price decline when futures prices are below spot...

In the above section, it states the following: "Comparing equation (3.5) with equation (3.3), we see that they imply h hat = beta. This is not surprising. The hedge ratio h hat is the slope of the best-fit line when percentage one day changes in the portfolio are regressed against percentage...