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Hedging Ratio Calculator

Work out hedging ratio instantly with clear inputs, formula shown and shareable results.

About Hedging Ratio Calculator

A beta hedge sells index futures with notional equal to the portfolio's beta-adjusted value, so market moves offset. Because contracts are indivisible, rounding leaves a residual exposure that should be reported rather than ignored.

Formula

Beta hedge

Contracts = portfolio value × beta / (futures price × multiplier)

Worked example

With the default values below, Hedging Ratio Calculator returns Contracts Needed To Hedge of 51.339. Change any input above and every figure here is recalculated in your browser.

Inputs used

Portfolio Valueminimum 0
50,000,000
Portfolio Betaaccepts -3–5
1.15
Index Futures Priceminimum 0
22,400
Contract Multiplieraccepts 1–10,000
50

Results

Contracts Needed To Hedge
51.339
Whole Contracts To Trade
51
Notional Hedged
$57,120,000.00
Unhedged Residual Exposure
$380,000.00

Step by step

  1. 1Values used
  2. 2Beta hedge
  3. 3Contracts Needed To Hedge= 51.339
  4. 4Whole Contracts To Trade= 51
  5. 5Notional Hedged= 57,120,000.00
  6. 6Unhedged Residual Exposure= 380,000.00

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
  • Figures are rounded for display to 3 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.

Frequently Asked Questions

Why multiply by beta?

A high-beta portfolio moves more than the index, so it needs proportionally more index futures to neutralise.

What risk remains after hedging?

Basis risk and specific risk. The hedge removes market direction, not stock selection or tracking differences.

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