Enter the value of position protected by a hedge ($) and the total position value ($) into the Hedge Ratio Calculator. The calculator will evaluate and display the Hedge Ratio.
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Hedge Ratio Formula
The following formula is used to calculate the Hedge Ratio.
HGR = VP / TV *100
- Where HGR is the Hedge Ratio (%)
- VP is the value of position protected by a hedge ($)
- TV is the total position value ($)
How to Calculate Hedge Ratio?
The following example problems outline how to calculate Hedge Ratio.
Example Problem #1:
- First, determine the value of position protected by a hedge ($).
- The value of position protected by a hedge ($) is given as: 15,000.
- Next, determine the total position value ($).
- The total position value ($) is provided as: 50,000.
- Finally, calculate the Hedge Ratio using the equation above:
HGR = VP / TV *100
The values given above are inserted into the equation below and the solution is calculated:
HGR = 15,000 / 50,000 *100 = 30 (%)
Example Problem #2:
For this problem, the variables required are provided below:
value of position protected by a hedge ($) = 60,000
total position value ($) = 150,000
Test your knowledge using the equation and check your answer with the calculator above.
HGR = VP / TV *100 = ?
