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Good day, Tutor!
Could you, please, explain and state what is the correct way to calculate basis in Interest Rate futures: is it “Spot interest rate – futures price” or “Futures price – Spot interest rate”. I guess the way we calculate the basis is important as it gives positive or negative figure.
thank you in advance!!!It doesn’t matter!
All that matters is that if the current futures price is lower then the current spot, then the futures price will stay lower than spot. If it is higher then it will stay higher.
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