Jet Fuel Cross-Hedging Strategy

Cross-hedging strategy for jet fuel price risk — a market with no exchange-traded jet fuel future. Tested three structures: heating oil futures only (Case A), crude oil futures only (Case B), and combined basket (Case C). Computed minimum-variance hedge ratios and optimal contract counts via OLS, ECM, and multiple-linear-regression across rolling windows, with both in-sample and out-of-sample performance testing. The combined hedge delivered the strongest result — 55% risk reduction at peak. Layered an April 2020 negative-WTI / super-contango case study.