o enter into a series of transactions that will insure that no impact on the hedger's assets occurs. Rather, the usual intent a hedger is to limit the extent of any risk, while still preserving the potential for gain, through the set of transactions. The hedger, by limiting risk, purposefully limits the potential of any gain; however, most have no desire to create a no impact situation (Salvatore, 2003).
There are different models available for determining a hedging ratio. A familiarity with these models provides a better understanding of the functioning of the hedging process in futures
...