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what are the sources of basis risk and how it can be minimised ?
what are these risks delta, gamma, vega, rho and theta ? and how they can be managed ?Basis risk results from the fact that futures prices and the spot rate (in the case of foreign exchange futures) are different from each other, and the difference between then changes. It cannot be managed as such.
Have you watched my lecture on futures?Delta, gamma, etc are all related to option pricing. Again they cannot be managed – but they can be measured.
Have you studied option pricing? If you watch my lecture it explains what the Greeks are.
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