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Tagged with optimal-hedge-ratio mean-variance
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How to construct a delta-neutral portfolio containing stocks using correlations?
I’m aware of the mean-variance framework where we construct a portfolio such that we attempt to minimise the variance and maximise returns.
What if instead we’re in a scenario where the main goal is ...
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Calculate minimum variance hedge ratio for foreign-denominated asset hedged to domestic currency
The formula for minimum variance hedge ratio (MVHR) is conceptually the correlation multiplied by the ratios of volatilities.
correl (Y,X) * (STDEV Y / STDEV X)
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