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Provide an Example of a Scenario That Would Increase Basis Risk

A sudden regulatory change affecting only the spot market, causing the spot and futures prices to diverge.
Greeks.Live24.11.25

Provide an Example of a Scenario That Would Increase Basis Risk.

An example is a sudden, unexpected regulatory announcement affecting only the spot market of a cryptocurrency, but not the derivatives exchange. If the spot price drops sharply due to the news while the futures contract price on a foreign exchange lags in reaction, the basis (difference) widens significantly, increasing basis risk for a hedger.

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