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# basis-risk

1. ### Explanation of Basis Risk

Can Basis Risk be explained with an example , on how the risk is calculated(basis risk that is) when the Price of the "Exposure" and "Hended Product" goes out of sync. Could this be explained with a detailed and a simple example please.
2. ### YouTube T3-05: Basis risk is about an unexpected weakening or strengthening

Basis = Spot price - Futures price; i.e., b(0) = S(0) - F(0, t). Unexpected weakening (strengthening) of the basis helps (hurts) the long hedger. David's XLS is here: http://trtl.bz/2trHMzs
3. ### P1.T3.710. Long and short hedges (Hull Chapter 3)

Learning objectives: Define and differentiate between short and long hedges and identify their appropriate uses. Describe the arguments for and against hedging and the potential impact of hedging on firm profitability. Define the basis and explain the various sources of basis risk, and explain...
4. ### Basis Risk Strengthening & Weakening in Notes

Hello, I would like to ask a question regarding P1.T3 Page 39. In the example for strengthening on May, basis is ($0,10), then there are two scenarios discussed in columns, weakening and strengthening scenario. Under Basis Weakening Scenario, Basis is stated as ($0,05) and Basis Strengthening...
5. ### Nagging question around Basis Risk

David: Couple of nagging ones (for me): 1. Does basis risk apply only in a cross-hedge? When the hedging asset (e.g. crude oil) is different from the underlying asset (e.g. jet fuel?) 2. I am a little confused about some of the prices used in the illustration of the basis risk. May I...