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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.

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