The necessary data for measuring the optimal hedge h in (2) are: foreign currency revenue in relation to total revenue – h1; foreign currency costs in relation to total costs
– h2; profits in relation to total revenues (here EBIT/Total Revenues) - r. Both h1 and r
are directly derived from financial reports, but there is no reported data on h2. Information on h2 comes from Investor Relations at the company, and was corroborated by interviews with hedge fund managers at a major Brazilian investment bank who regularly track the company. The common view is that h2 is close to 25% in the period analyzed. We use this number and a sensitivity analysis shows that for even large changes in h2 results remain unchanged. For the period 1999-2008, data are presented in Table 5 (in absolute values), and the optimal hedge (in US$mil) is the multiplication of
– δ and the EBIT (in US$ mil).