Get a unique, high-quality and non-plagiarized paper from us today at the most affordable price
Email us :


You are an associate at a commercial bank. One of your colleagues has sent the following email:
“Thanks again for sending Hull’s chapter on hedging with futures. As you know we do a lot of work with energy-intensive companies, so one of his examples seemed especially relevant. His cross-hedging strategy (jet fuel and heating oil) is interesting, but we were wondering what would happen in turbulent markets? For example in 2014 crude oil dropped from about USD 100 per barrel to around USD 50 per barrel. What would happen to someone using Hull’s proposed strategy over this time? Would it make sense to consider other energy futures as part of a hedging strategy (i.e. we have been wondering about including crude oil futures in addition to heating oil)?
Any thoughts you have would be greatly appreciated.”

Your colleague has limited quantitative skills and so you feel that you can best demonstrate these concepts through a clear example, based on data taken from the period she noted.
You consider what might happen over this time to someone who wanted to hedge the price risk of 500,000 gallons of jet fuel. You note that the futures data is taken from NYMEX where heating oil contracts are quoted in USD per gallon (contract size of 42,000 gallons) and crude oil is quoted in USD per barrel (contract size of 1,000 barrels).
Your assistant has downloaded spot jet fuel, crude oil futures and heating oil futures daily prices from December 31, 2012 through April 18, 2016 (see file “Daily Jet Fuel and Energy Prices – 25762 DRM – AUT 2016.xlsx”). You double check that their use of the “lookup” function in Excel was done properly so that the combined data is correctly lined up through time.
You basically have two goals. First, you want to see how hedge ratios estimated with 2013, 2014 or 2015 data differ from each other. Second, you want to note any differences between using only heating oil futures versus heating oil and crude oil futures to hedge jet fuel price changes across these different time periods. To draw your conclusions, you perform the following investigations:
i) By using the data in 2013 only, 2014 only, 2015 only and then both 2013-2014, you compute and compare the corresponding hedge ratios (thus the optimal number of futures contracts). You also consider hedging with only heating oil futures versus heating oil and crude oil futures.
ii) You assess how each of these hedge ratios performs (by comparing standard deviations of unhedged and hedged positions), when they are used to hedge the jet fuel price changes in 2015 and 2016?
iii) How do these two factors influence the valuation changes / cash flows a hedger might have received in 2015 and 2016? What are the main issues you have identified with this hedging application and what are your suggestions to deal with those?

Place your order now for a similar paper and have exceptional work written by our team of experts to guarantee you A Results

Why Choose US   :

    6+ years experience on custom writing

    80% Return Client

    Urgent 2 Hrs Delivery

    Your Privacy Guaranteed

    Unlimited Free Revisions

How to Place an Order 

Send the assignment details such as the instructions, due date/deadline, number of pages and college level to the customer support agent online on live chat,  fill in the assignment details at place an order or send the information to our email address and a customer support agent will respond to you immediately. 

Once you place your order, we choose for you the best and competent writer for your assignment based on each writer’s competence in handling a subject. 

When the homework is completed, we have a quality assurance team that proofreads the assignment to ensure it meets the required rubric instructions from your professor.

After thorough review of your assignment, we send the paper to the client. In case you need any changes at this point, you can let us know so that we can handle it for you at no extra charge. 

Homework Help Website

Why we should write your Paper 

  1. Money Return guarantee
  2. 0% Plagiarism Rate
  3. Guaranteed Privacy
  4. Written from scratch by highly qualified writers 
  5. Communication at Any Time (24/7)
  6. Flexible Pricing and Great Discount Programs
  7. Timely Deliveries
  8. Free Amendments
Looking for a similar assignment and in urgent need for help? Place your order and have excellent work written by our team of professionals to ensure you acquire the best grades.

  We are here to assist you.


Statistics about Us

130 New Projects
235 Projects in Progress
315 Inquiries
420 Repeat clients

© 2021 Premiered Tutorials
All rights reserved. We provide online custom written papers, such as term papers, research papers, thesis papers, essays, dissertations and other custom writing services.

All papers inclusive of research material are strictly intended to be used for research and study purposes only. Premiered Tutorials does not support or condone plagiarism in any form. These custom papers should be used with proper reference.

Place an Order
error: Content is protected !!