Consider a buyer of crude oil who wants to hedge its, Ask an Expert

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Consider a buyer of crude oil who wants to hedge its purchase price in October. The firm buys December futures contracts on oil and will unwind the hedge in October. The firm will buy the same type of oil and in the same delivery location as specified in the futures contract. Which of the following is a relevant source of basis risk?

1. Changes in oil prices.

2. Changes in the storage cost of oil.

3. Changes in the riskless interest rate.

4. Chagnes in the convenience yield for oil.

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Financial Management, Finance

Category:- Financial Management
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