A futures contract on a 30 day Eurodollar time deposit is currently selling at an IMM index of 95.75 percent. The IMM index on a

Question

Lubov Fominskaja [6]

3 years ago

8

A futures contract on a 30 day Eurodollar time deposit is currently selling at an IMM index of 95.75 percent. The IMM index on a

30 day Eurodollar time deposit for immediate delivery is 95.10 percent. What is the basis risk for the futures contract

Business

1 answer:

kolezko [41] · Answer 1 · 2022-05-05T09:19:05+03:00

Answer:

Basis risk for the future contract is 0.65%

Explanation:

Basis risk is the difference in spot price and future price of an hedged asset. It is the difference between the price price of an hedged asset and price of the asset serving as the hedge.

Basis risk = Futures price of contract − Spot price of hedged asset

Basis Risk = Future IMM index - Spot IMM index

Basis risk = 95.75% - 95.10%

Basis risk = 0.65%