Module 1 · Lesson 4 · 8 min

Why Log Prices Beat Raw Spreads

What you'll be able to do

  • Show with numbers why a raw dollar gap changes size with the price level while a log gap does not.
  • Size the B leg of a pair from a log-price β: notional_B = β × notional_A.
  • Spot the wrong hedge that multiplies by P_A / P_B, and say what it leaves you holding.

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