former

Where are you seeing this?

Your understanding of basis risk seems accurate to me. (although there maybe other sources for basis risk other than interest rate risk, e.g. commodity futures will face basis risk due to quality, location, etc.)

Typically the futures will be close to spot as the contract is close to maturity, during that time the basis risk is naturally low; perhaps the text is not articulating time aspect?



Edited 1 time(s). Last edit at Sunday, May 1, 2011 at 08:42AM by jbaphna.