The tailed minimum-variance hedge ratio becomes lower in comparison to the untailed one when
A)Nominal interest rates rise and hedge maturity increases.
B)Real interest rates rise and hedge maturity decreases.
C)Nominal Interest rates fall and hedge maturity increases.
D)Real interest rates fall and hedge maturity decreases.

Question

Quizplus · Accepted Answer

The tail factor depends only on nominal interest rates and maturity.

The Tailed Minimum-Variance Hedge Ratio Becomes Lower in Comparison to the Untailed