1. Ratio of the value of futures contracts purchased or sold to the value of the cash commodity being hedged, a computation necessary to minimize basis risk. 2. The ratio, determined by an option's delta, of futures to options required to establish a risk-free position. For example, if a $1/barrel change in the underlying futures price leads to a $0. 25/barrel change in the options premium, the' HEDGE RATIO' is four (four options for each futures contract).
Barry Goldsmith
| APA | Barry Goldsmith. (2010). hedge ratio. Retrieved September 21, 2026, from http://smartdefine.org/hedge_ratio/definitions/1155342 |
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