Assume there are two ways to hedge an exposure in two years time, either hedge by rolling
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Assume there are two ways to hedge an exposure in two years’ time, either hedge by rolling two one-year future contract forward, or hedge using a two-and-half-year future contract, and close out the position in two years. The former one is better since there is no maturity mismatch, and the basis risk is zero.
True or False
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