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A short hedge is one where a short position is taken on a futures contract. It is typically . replication in the futures/options market, cross hedging can be employed. . a European call, K is the strike price for the call and put, and r is th

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Cross Hedging – Hedge Ratio The hedge ratio is the ratio of the size of the position taken in futures contracts to the size of the exposure. When the asset underlying the futures contract is the same as the asset being hedged, a hedge ratio of 1.0

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