Optimal Hedge Ratio in Financial Formulas

Optimal Hedge Ratio is the proportion of a position in a hedging asset relative to the position being hedged, aiming to minimize risk exposure while maximizing effectiveness in hedging. And is denoted by Δ_optimal.

Formulas to find Optimal Hedge Ratio in Financial

fxOptimal Hedge RatioGo

Financial formulas that make use of Optimal Hedge Ratio

fxOptimal Number of ContractsGo

List of variables in Financial formulas

fx Standard Deviation of Changes in Spot Price Go

fx Standard Deviation of Changes in Futures Price Go

fx Correlation of Changes in Spot and Futures Prices Go

FAQ

What is the Optimal Hedge Ratio?

Optimal Hedge Ratio is the proportion of a position in a hedging asset relative to the position being hedged, aiming to minimize risk exposure while maximizing effectiveness in hedging.

Can the Optimal Hedge Ratio be negative?

{YesorNo}, the Optimal Hedge Ratio, measured in {OutputVariableMeasurementName} {CanorCannot} be negative.

Let Others Know

✖

Facebook

Twitter

Copied!