How this calculator works
This value-based ratio measures coverage, not hedge effectiveness. Enter values in the same currency and on a consistent exposure basis. A ratio above 100% means the hedge value exceeds the stated exposure. Correlation, basis risk, contract multipliers and changes in sensitivity can still leave risk after a nominal 100% hedge.
Formula
Hedge ratio = hedge value/exposure value. Hedge value = ratio × exposure. Unhedged value = exposure - hedge.
Worked example
A $60,000 hedge against $100,000 exposure gives a 60% hedge ratio and $40,000 unmatched exposure. A $150,000 hedge against $100,000 exposure is a 150% ratio.
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Frequently asked questions
Can the ratio exceed 100%?
Yes. That is an overhedge by value and may introduce exposure in the opposite direction.
Does equal hedge value eliminate all risk?
No. Differences in price behaviour, timing, basis and contract terms may remain.
How does this differ from the optimal hedge ratio?
The optimal ratio uses covariance or correlation and volatility to minimize modelled variance.