What happens to the basis through the contract's life?
A)it initially decreases,then increases
B)it initially increases,then decreases
C)it remains relatively steady
D)it moves toward zero
E)none of the above

Question

Quizplus · Accepted Answer

The basis, which is the difference between the spot price of an asset and the future price of the same asset, typically moves toward zero as the contract approaches its expiration date. This is because the prices converge as the delivery date nears, reducing the discrepancy between the spot and future prices.

What Happens to the Basis Through the Contract's Life