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Question 6.9: Find the optimal hedge ratio if the interest rates are const...

Find the optimal hedge ratio if the interest rates are constant.

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Since f(t, T)=S(t)e^{r(T−t)} ,  the random variables S(t) and f(t, T) are perfectly correlated with ρ_{S(t)f(t,T )} = 1 and σ_{f(t,T )}=e^{r(T−t)}σ_{S(t)}. It follows that N =e^{−r(T−t)}.

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