Which technique can be used to compute the minimum variance hedge ratio?
A)duration analysis
B)present value
C)regression
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

Regression analysis is the technique used to calculate the minimum variance hedge ratio. This involves regressing the returns of the hedged asset against the returns of the hedging instrument, and the slope of the resulting regression line is the hedge ratio that minimizes the variance of the portfolio. Duration analysis and present value are not directly used to calculate the minimum variance hedge ratio.

Which Technique Can Be Used to Compute the Minimum Variance