Multiple Choice
The correlation between changes in price of a spot asset and futures asset is 99%. The standard deviation of changes in spot prices is $2, and that of futures prices is $3. What is the standard deviation of a position that is long 5 units of the spot asset and is optimally (i.e., minimum-variance) hedged by using futures?
A) 1.41
B) 1.99
C) 2.52
D) 3.11
Correct Answer:
Verified
Correct Answer:
Verified
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