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Postby anbu.edu » Mon Oct 14, 2013 2:28 am

In analyzing the differences between the spot price of wheat and the price of a wheat futures contracts at a given time, what causes changes in the basis?

A) Changes in cost of carry of the asset.
B) Price volatility.
C) Basis risk.
D) Arbitrage transactions.


Please explain the answer

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pradeeppdy
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Postby pradeeppdy » Fri Oct 18, 2013 12:04 pm

I think here the answer is C because the basis risk is obtained by subtracting the futures price from the cash price, And the basis risk reflects the relationship between cash price and futures price.

pradeeppdy
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Postby pradeeppdy » Fri Oct 18, 2013 12:05 pm

I think here the answer is C because the basis risk is obtained by subtracting the futures price from the cash price, And the basis risk reflects the relationship between cash price and futures price.


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