Q204
The difference between the cash price and the futures price on the same asset or commodity is known as the________________.
A.
basis
AnswerB.
spread
C.
yield spread
D.
premium
Answer: Option A
Solution
Answer: Option A
Solution:
The difference between the cash price and the futures price on the same asset or commodity is known as the basis. It is a crucial concept for portfolio managers and traders because this relationship between cash and futures prices affects the value of the contracts used in hedging.