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A company expects to buy 1 million barrels of Intermediate crude oil in 1 year. The annualized volatility of the price of a barrel of WTI is calculated at 12%. The company chooses to hedge by buying a futures contract on Brent crude. The annualized volatility of the Brent futures is 17% and the correlation coefficient is 0.68. Calculate the variance-minimizing hedge ratio.
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