Answer: 0.50

The minimum variance hedge ratio is \[ h^* = \rho\frac{\sigma_S}{\sigma_F} \] Substituting the values: \[ h^* = 0.80 \times \frac{0.20}{0.32} = 0.80 \times 0.625 = 0.50 \] So the minimum variance hedge ratio is **0.50**.

Author: Manit Arora