Optimal Hedge Ratio Calculator
Result
Optimal Hedge Ratio Calculator The Optimal Hedge Ratio Calculator (minimum-variance hedge) finds the hedge that minimises risk using the correlation and volatilities of the spot and futures prices. Enter correlation and the two standard deviations. — free online calculator.
Formula
- Optimal Hedge Ratio Calculator calculates its result from Correlation (spot vs futures), Spot Price Std Deviation, Futures Price Std Deviation. It uses the formula Optimal Hedge Ratio = Correlation × (Spot Volatility ÷ Futures Volatility). Change any input to recalculate the result instantly.
- The main inputs are Correlation, Spot Price Std Deviation, Futures Price Std Deviation. Enter them in the units and format shown in the calculator.
- Use monetary amounts, rates and time periods exactly as labeled; the result reflects the assumptions entered on this page.
- Changing any input above recalculates the result with the same calculation engine used by this page.
Example: Optimal Hedge Ratio
- Correlation: 0.9 spot vs futures
- Spot Price Std Deviation: 12
- Futures Price Std Deviation: 15
Using Correlation (spot vs futures) = 0.9, Spot Price Std Deviation = 12, Futures Price Std Deviation = 15, the calculated result is 0.72.
Sample result: Calculating…
Frequently asked questions
What does the Optimal Hedge Ratio calculate?
Optimal Hedge Ratio Calculator The Optimal Hedge Ratio Calculator (minimum-variance hedge) finds the hedge that minimises risk using the correlation and volatilities of the spot and futures prices. Enter correlation and the two standard deviations. — free online calculator.
Which values should I enter?
Enter Correlation, Spot Price Std Deviation, Futures Price Std Deviation using the units and format shown beside each field.
What formula does this calculator use?
The calculator uses the following relationship: Optimal Hedge Ratio = Correlation × (Spot Volatility ÷ Futures Volatility).
Why might my result differ from another source?
Results can differ when another source uses different units, rounding rules, conventions or assumptions. Compare the inputs and definitions before comparing results.
Does the result update automatically?
Yes. Changing an input updates the result using the same calculation engine shown on this page.