🛡️ Hedge Ratio Calculator
Minimum-variance hedge ratio
How to Use This Calculator
1
Enter Covariance
Covariance between spot and futures changes.
2
Enter Futures Variance
Variance of futures price changes.
3
Calculate
Get minimum-variance hedge ratio.
Formula
h* = Cov(ΔS, ΔF) / Var(ΔF)
Example: Cov=0.0025, Var=0.0050 → h*=0.5
Frequently Asked Questions
What does h* represent?
The optimal number of futures per unit of exposure to minimize variance.
What about contract size?
Multiply h* by exposure/contract value to get number of contracts.