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Sir, in the question, Polytot, when calculating the receipt from futures, the estimated closing futures price we deduct the basis from opening futures (1.5275)
1) won’t that increase the basis?
2) I have seen may variations in the expected futures rates used in the calculations. So if closing spot or futures is not provided, can I assume forward rates as the closing spot rates?
3) If for some reason forward rates are not provided, can I assume the opening futures as closing spot rate?
4) If I am to use the effective rate, would it be OK just to convert amount receivable at the effective rate?
Thanks.
1. Deducting the basis is not increasing the basis – that does not make sense.
If the futures price is currently higher than spot then it will always be higher than spot.2. These days you will almost certainly not be told the future spot or futures rate, and you will usually be using the lock-in rate.
This is all explained in my free lectures on foreign exchange risk management.
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