This is a feature that all hedgers must deal with. Hedgers in the futures market are “speculators on the basis,” trading greater price risk for a lessor basis risk. The basis risk is the difference between the price of the instrument and the price of the underlying asset being hedged. A rolling stack of short-dated futures initially increases the variance of cash flows...
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This is a feature that all hedgers must deal with. Hedgers in the futures market are “speculators on the basis,” trading greater price risk for a lessor basis risk. The basis risk is the difference between the price of the instrument and the price of the underlying asset being hedged. A rolling stack of short-dated futures initially increases the variance of cash flows...
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