TY - JOUR
T1 - BASIS VOLATILITY
T2 - IMPLICATIONS FOR HEDGING
AU - Castelino, Mark G.
PY - 1989
Y1 - 1989
N2 - Most hedges placed in futures markets must be lifted before contract expiration, which necessitates incurring “basis risk.” The focus of this paper is on quantifying such risk as a function of the timing of a hedge, its duration, distance from contract expiration, hedge life, and other market‐observable variables. The development of basis‐risk profiles provides a hedger with estimates of hedging risks that reasonably can be expected before the actual placement of hedges, thus serving as a useful input in the hedging decision.
AB - Most hedges placed in futures markets must be lifted before contract expiration, which necessitates incurring “basis risk.” The focus of this paper is on quantifying such risk as a function of the timing of a hedge, its duration, distance from contract expiration, hedge life, and other market‐observable variables. The development of basis‐risk profiles provides a hedger with estimates of hedging risks that reasonably can be expected before the actual placement of hedges, thus serving as a useful input in the hedging decision.
UR - http://www.scopus.com/inward/record.url?scp=84986456073&partnerID=8YFLogxK
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U2 - 10.1111/j.1475-6803.1989.tb00110.x
DO - 10.1111/j.1475-6803.1989.tb00110.x
M3 - Article
AN - SCOPUS:84986456073
SN - 0270-2592
VL - 12
SP - 157
EP - 172
JO - Journal of Financial Research
JF - Journal of Financial Research
IS - 2
ER -