Is Basis Risk Present in Both Physically-Settled and Cash-Settled Futures? ⎊ Path

Is Basis Risk Present in Both Physically-Settled and Cash-Settled Futures?

Yes, basis risk is present in both types of futures contracts. For physically-settled contracts, basis risk is related to the difference between the local spot price of the hedger's asset and the price at the specified delivery location.

For cash-settled contracts, it relates to the difference between the hedger's spot price and the index or reference rate used for settlement. The nature of the divergence differs, but the risk of imperfect offset remains.

Why Is Variation Margin Not Typically Required for Physically-Settled Futures Contracts?

How Does Margin Requirement Differ between Physically-Settled and Cash-Settled Futures?

What Is the Role of the Settlement Price Index in Cash-Settled versus Physically-Settled Options?

How Does a Physically Settled Crypto Future Differ in Tax Timing from a Cash-Settled One?

Is the Risk of Non-Delivery Considered a Type of Basis Risk?

What Are the Key Differences in Settlement Price Calculation between Physically-Settled and Cash-Settled Futures?

What Is the Difference between a Physically Settled and a Cash-Settled Futures Contract?

Does the Settlement Process for Cash-Settled Options Differ from Physically-Settled Options at Expiration?

Glossar

Convergence at Expiration

Expiration ⎊ Convergence at Expiration, within cryptocurrency derivatives, denotes the precise moment an options contract ceases to exist, marking the culmination of its lifecycle.

Basis Risk

Exposure ⎊ The core of basis risk within cryptocurrency derivatives, particularly options, stems from the imperfect correlation between the price movements of the underlying asset and its derivative contract.