Financial Derivatives Question Help
Hey guys! I've got a Derivatives question from one of my college courses that I am looking to get a little bit of advice on.
The question is: 2. Suppose that you are hedging your entire portfolio with foreign exchange futures contract. Let the domestic U.S. risk-free rate be denoted as r, while the foreign interest rate be denoted as , and the futures contract will expire at time T while you're hedging from date t, show that the optimal hedge ratio is given as e^(rf – r)(T-t)
Any help would be appreciated!
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