Acompany wishes to hedge its exposure to a new fuel whose price changes have a 0.6 correlation with gasoline futures price changes. the company will lose $1 million for each 1 cent increase in the price per gallon of the new fuel over the next three months. the new fuel's price change has a standard deviation that is 50% greater than price changes in gasoline futures prices. if gasoline futures are used to hedge the exposure what should the hedge ratio be? what is the company's exposure measured in gallons of the new fuel? what position measured in gallons should the company take in gasoline futures? how many gasoline futures contracts should be traded? each contract is on 42,000 gallons.
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Business, 23.06.2019 03:00, natalie407888
For example, the upper right cell shows that if expresso advertises and beantown doesn't advertise, expresso will make a profit of $15 million, and beantown will make a profit of $2 million. assume this is a simultaneous game and that expresso and beantown are both profit-maximizing firms. if expresso decides to advertise, it will earn a profit of $ million if beantown advertises and a profit of $ million if beantown does not advertise. if expresso decides not to advertise, it will earn a profit of $ million if beantown advertises and a profit of $ million if beantown does not advertise. if beantown advertises, expresso makes a higher profit if it chooses . if beantown doesn't advertise, expresso makes a higher profit if it chooses . suppose that both firms start off not advertising. if the firms act independently, what strategies will they end up choosing? expresso will choose to advertise and beantown will choose not to advertise. expresso will choose not to advertise and beantown will choose to advertise. both firms will choose to advertise. both firms will choose not to advertise.
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Acompany wishes to hedge its exposure to a new fuel whose price changes have a 0.6 correlation with...
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