The Basis Is Defined as Spot Minus Futures

question 3

Multiple Choice

The basis is defined as spot minus futures.A trader is hedging the sale of an asset with a short futures position.The basis increases unexpectedly.Which of the following is true?

• A) The hedger's position improves.
• B) The hedger's position worsens.
• C) The hedger's position sometimes worsens and sometimes improves.
• D) The hedger's position stays the same.

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Definitions:

Nominal GDP

The gross domestic product measured at current market prices, without adjustment for inflation.

GDP Deflator

An index that measures the change in prices of all new, domestically produced, final goods and services in an economy over a period of time.

Inflation Rate

The magnitude of price escalation for goods and services across the board, causing a drop in consumer purchasing prowess.

Inflation Rate

The percentage increase in the general price level of goods and services in an economy over a given period, often measured annually.