Study Notes R20.P1.T4.Tuckman_v3.1
Greetings everyone. I hope this finds you all well in studying for the exam coming up. I was hoping someone could help me with a very simple concept of the regression hedge example found on page 67 with the section titled...
In GARP's FMP book pages 88-89 the basis risk is being explained. It talks about the strengthening (increase) of the basis and weakening (decrease) of the basis. It defines the basis as:
Basis = Spot Price of asset to be hedged - Futures Price of contract used