Basis Risk Involves the Risk That the Price of Futures

question 34

True/False

Basis risk involves the risk that the price of futures contracts will not vary in exactly the same way as the price of the item being hedged.

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Definitions:

Rules

Guidelines or principles governing behavior or procedural conduct.

Behavior-Reinforcement Belief Expectancy

A concept in psychology that suggests an individual's belief in the likelihood of receiving reinforcement for a behavior influences the expectancy and motivation to perform that behavior.

Contiguity

The state of being close together in time or space, often used in psychology to describe the association between two stimuli or events.

Expectations

Beliefs or predictions about future events based on past experiences or information.