Before you can use the hedging strategies such as a forward market hedge,options market hedge,and so on,you should consider running a regression of the form .When reviewing the output,you should initially focus on

Question

Before you can use the hedging strategies such as a forward market hedge,options market hedge,and so on,you should consider running a regression of the form  .When reviewing the output,you should initially focus on

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When using hedging strategies, a regression is conducted to determine the relationship between the variable being hedged and the price of the hedging instrument. The slope coefficient (b) is the most important output to focus on as it provides information on how the variable being hedged is affected by changes in the price of the hedging instrument. The intercept (a) is also important but to a lesser extent. Mean square error (MSE) is a measure of the variability in the data and does not directly relate to the effectiveness of hedging strategies. "R²" is not a valid term and therefore not relevant.

Before You Can Use the Hedging Strategies Such as a Forward