How Does a Lack of Convergence at Expiration Indicate High Basis Risk? ⎊ Path

How Does a Lack of Convergence at Expiration Indicate High Basis Risk?

A lack of convergence means that the futures price and the spot price remain significantly different on the expiration date. Since the fundamental principle of futures is that the prices must converge at expiration, a failure to do so indicates that there is a major market inefficiency, a logistical bottleneck, or a flaw in the reference rate, all of which represent high, unhedged basis risk.

How Does the Lack of an Expiration Date Affect the ‘Basis’ of a Perpetual Future?

How Does the Lack of ‘Basis Risk’ (Relative to Expiration) Benefit the Perpetual Swap Trader?

How Does the Final Settlement Process Differ between the Two Contract Types?

How Do Exchanges Handle Situations Where the Final Settlement Date Falls on a Holiday or Weekend?

What Is ‘Convergence’ in Futures Pricing?

What Is the Role of the Final Settlement Date in Determining the Settlement Price?

Define ‘Expiration Date’ in the Context of a Traditional Futures Contract

Explain the Concept of “Convergence” between Futures and Spot Prices