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James S. Doran
Assistant Professor of Finance
Florida State University
1
Senior Seminar 4934
Option Pricing a
sk Management
nd Financial Ri
Homework #1
For this homework you will need to use the excel file
Oil.xls
. Note that there are futures prices
for crude oil, heating oil, and propane only. Part of this assignment is your ability to organize
and analyze data. Note that the prices and dates are not aligned, requiring you to manipulate
the
below. The use of the lookup function will help.
data before you can evaluate the problems
.
Que
o
1
sti n on Minimum Variance hedge
a.)
Using the data in the oil.xls file, calculate the standard deviation and
correlation of
returns
between the various oil commodities (all 10). Use the
lculate the
spot prices only. (Help Note: Use the
Data Analysis
to ca
correlation)
b.)
Calculate the minimum variance hedge ratios using only
spot crude oil
prices,
ing oil and propane
using 1 month, 2,
and hedged with the
futures prices of heat
month, and 3 month maturity contracts.
n the implication of these numbers
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 Spring '10
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 Finance

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