Financial Risk Manager Part 1

Ultimate access to all questions.

Explanation:

The minimum variance hedge ratio is

h^* = \rho\frac{\sigma_S}{\sigma_F} = 0.70\times\frac{0.12}{0.20} = 0.42

For a simple regression of spot changes on futures changes, the coefficient of determination is

R^2 = \rho^2 = 0.70^2 = 0.49 = 49\%

So the correct answer is 0.42 and 49.0%.

Explanation:

The minimum variance hedge ratio is

h^* = \rho\frac{\sigma_S}{\sigma_F} = 0.70\times\frac{0.12}{0.20} = 0.42

For a simple regression of spot changes on futures changes, the coefficient of determination is

R^2 = \rho^2 = 0.70^2 = 0.49 = 49\%

So the correct answer is 0.42 and 49.0%.

Comments (0)

No comments yet.

Exam-Like

Community

MManit

Last updated: April 18, 2026 at 11:32

1.167 (MV hedge) and 7.0% (R^2)

0.0%

0.42 (MV hedge) and 7.0% (R^2)

0.0%

0.42 (MV hedge) and 49.0% (R^2)

100.0%

0.42 (MV hedge) and 42.0% (R^2)