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Sir when do we add n when do we deduct basis risk to find closing future price . Is that correct that if spot rate bigger than future price in that case we deduct basis,please clarify. Thanks
If the current futures price is higher than the current spot rate, then the futures price will always be higher. If, on the other hand, the current futures price is lower than the current spot rate, then the futures price will always be lower.
So that means if current future price higher than current spot rate then we will add basis risk and vice versa am I right.
Thank you so much sir,u are genius i m sure u r getting blessing of thousand students like me.
Sir can you please have a look at Phobos co 12/08, as we R selling so taking settlement price as per lecture.Current spot price is 94 and current future/settlement price is 93.88, then why r they adding basis,because as per ur reply current future price is less so they should be reducing basis risk. Please clarify.
ThanksSorry sir did u mean it should be deducted from 100,I thought it should be deducted from 7. Please clarify. Thanks
Current interest (equivalent to 6%) is 94; current futures is 93.88. So futures price is lower.
Interest at close out equivalent is 93, so futures at close must be lower than 93.
Thank you sir,so if current future price smaller than current spot price then i will deduct basis risk from 100. I hope i right.
Thanks
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