Does a Basis of Zero Imply a Perfect Hedge? ⎊ Path

Does a Basis of Zero Imply a Perfect Hedge?

A basis of zero (Spot Price = Futures Price) at the inception of a hedge does not guarantee a perfect hedge. A perfect hedge requires the basis to be zero at the expiration of the futures contract.

If the basis remains constant throughout the hedge period, the hedge will be perfect. If the basis changes, the hedge will be imperfect, regardless of the initial basis value.

Is There a Minimum Holding Period for a Derivative to Qualify as Long-Term?

How Does the Choice of Look-Back Period Affect Historical Volatility?

What Is a ‘Perfect Hedge’ and Why Is It Difficult to Achieve in Practice?

Does Delta Remain Constant Throughout the Life of an Option?

How Would This Formula Change for a Liquidity Pool Governed by a Constant Mean or Constant Sum Formula?

How Is the Holding Period Affected by Rolling over a Futures Contract?

How Does a Constant Sum Market Maker (X+y=k) Differ from a Constant Product AMM?

What Are the Advantages and Disadvantages of Using a Constant Sum Formula versus a Constant Product Formula in an AMM?