Which One of the Following Statements Regarding "Basis" Is Not

question 84

Multiple Choice

Which one of the following statements regarding "basis" is not true?

• A) The basis is the difference between the futures price and the spot price.
• B) The basis risk is borne by the hedger.
• C) A short hedger suffers losses when the basis decreases.
• D) The basis increases when the futures price increases by more than the spot price.

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Definitions:

Security Interest Transactions

A legal and financial arrangement where collateral is provided to secure a debt or obligation.

Agreement

A mutual understanding or arrangement between two or more parties, often formalized by a written document.

Perfecting Security Interest

The legal process by which a secured party establishes a priority claim on a debtor's collateral in case of default.

Attachment

A legal procedure by which a court of law, at the request of a creditor, designates specific property owned by the debtor to be transferred to the creditor or sold for benefit of the creditor.