Filter by Categories
Accounting
Banking

Derivatives




Basis Narrowing


The basis can develop a narrowing trend when the futures price of an asset/ commodity increases faster than the sport price. For example, CBOT November wheat futures are up 3 cents on the day. However, the wheat bid for March delivery is up 6 cents on the day. In this case, the basis is said to have narrowed 3 cents. The basis can also narrow in a lower market. For example, the wheat futures decrease by 5 cents and the cash bid is only down 3 cents. As such, the basis is said to have narrowed 2 cents.

A basis narrowing is the opposite of a basis widening.



ABC
Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
Watch on Youtube
Remember to read our privacy policy before submission of your comments or any suggestions. Please keep comments relevant, respectful, and as much concise as possible. By commenting you are required to follow our community guidelines.

Comments


    Leave Your Comment

    Your email address will not be published.*