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hi sir
i didnt get the part where you calculated the basis change 24-8 and then figure of the change in basis came as 0.0016.
because the way ive been practicing was the how you did in the lectures- where we calculate the basis for the number of months the transaction is due in , and the future price is the balance between the basis and the spot rate.
could you please explain the above thanks.
also another question , this may be stupid to ask, but is the lock in rate the actual future rate when the transaction will take place?
thanks alot
We do not know what the spot rate will be in 4 months time, so we need to calculate the lock-in rate.
The lock-in rate is not an actual future price, it is a rate that gives the net effect of converting the transaction at spot, together with the profit or loss on the futures.
I explain it in full in my lectures on the lock-in rate.
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