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Basis risk calculation

This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.

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May 27, 2017 at 4:33 pm #388448
tich2010
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May someone help me on the question on technical articles on Titans on how the unexpired basis risk was calculated. I managed to find the 0.035 but cant figure out where the 0.5 is coming from . Help
Thank you
May 27, 2017 at 4:53 pm #388457
John Moffat
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- Topics: 57
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The loan starts in 2 weeks time i.e 0.5 months on 1 January.
March futures end of 31 March which is therefore in 3.5 months time.
The basis falls linearly to zero over the life of the future and will therefore fall by 0.5/3.5 of the current basis.
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