An Airline has been buying jet fuel. The company wishes to enter into futures market to buy jet fuel. It has been observed that the correlation coefficient between the Kenya shillings and the USA dollar was -0.32. It was also known that risk of Kenya shillings and USA dollar were 0.06 and 0.04, respectively. In the future markets Jet fuel is sold in units of 1,000 barrows. The over ll demand of jet fuel by the airline was 330,000000 barrows of jet fuel. Required: (a) Compute and Comment of the Hedge ratio (b) Compute the Number of lot of jet fuel barrows would be hedged against
An Airline has been buying jet fuel. The company wishes to enter into futures market to buy jet fuel. It has been observed that the correlation coefficient between the Kenya shillings and the USA dollar was -0.32. It was also known that risk of Kenya shillings and USA dollar were 0.06 and 0.04, respectively. In the future markets Jet fuel is sold in units of 1,000 barrows. The over ll demand of jet fuel by the airline was 330,000000 barrows of jet fuel. Required: (a) Compute and Comment of the Hedge ratio (b) Compute the Number of lot of jet fuel barrows would be hedged against
Chapter22: International Financial Management
Section: Chapter Questions
Problem 7P
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An Airline has been buying jet fuel. The company wishes to enter into futures market to buy jet fuel. It has been observed that the correlation coefficient between the Kenya shillings and the USA dollar was -0.32. It was also known that risk of Kenya shillings and USA dollar were 0.06 and 0.04, respectively. In the future markets Jet fuel is sold in units of 1,000 barrows. The over ll demand of jet fuel by the airline was 330,000000 barrows of jet fuel.
Required:
(a) Compute and Comment of the Hedge ratio
(b) Compute the Number of lot of jet fuel barrows would be hedged against
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