Which of the following involves an additional source of basis risk due to the difference between the asset being hedged and the asset underlying the futures?

Question

Quizplus · Accepted Answer

Cross hedge involves an additional source of basis risk due to the difference between the asset being hedged and the asset underlying the futures. A long hedge involves buying futures contracts to hedge against the price increase of an asset, whereas a short hedge involves selling futures contracts to hedge against the price decrease of an asset. A stack hedge involves hedging multiple future contracts of the same underlying asset.

Which of the Following Involves an Additional Source of Basis