Question: please expain in a easy way Basis Risk: Basis = St - Ft = = Spot of price to hedge - Futures contract price Why

please expain in a easy way please expain in a easy way Basis Risk: Basis = St -

Basis Risk: Basis = St - Ft = = Spot of price to hedge - Futures contract price Why is there basis? Asset to be hedged may not be exactly the same as the asset underlying the futures contract - difference in quality difference in location calendar difference Basis risk = the uncertainty about the basis when the hedge is closed

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