4.10 Optimal Hedge Ratio Proportion of the exposure that should optimally be hedged is h S F Where Os is the standard deviation of 8S, the change in the spot price during the hedging period oF is the standard deviation of Sf, the change in the futures price during the hedging period p is the coefficient of correlation between 8S and 8F Options, Futures, and other Drerivatives, 5th edition o 2002 by John C. HullOptions, Futures, and Other Drerivatives, 5th edition © 2002 by John C. Hull 4.10 Optimal Hedge Ratio Proportion of the exposure that should optimally be hedged is where sS is the standard deviation of dS, the change in the spot price during the hedging period, sF is the standard deviation of dF, the change in the futures price during the hedging period r is the coefficient of correlation between dS and dF. h S F * = r s s