4.9 Choice of Contract Choose a delivery month that is as close as possible to, but later than, the end of the life of the hedge When there is no futures contract on the asset being hedged, choose the contract Whose futures price is most highly correlated with the asset price There are then 2 components to basis Options Futures, and Other Drerivatives, 5th edition@ 2002 by John C. HullOptions, Futures, and Other Drerivatives, 5th edition © 2002 by John C. Hull 4.9 Choice of Contract • Choose a delivery month that is as close as possible to, but later than, the end of the life of the hedge • When there is no futures contract on the asset being hedged, choose the contract whose futures price is most highly correlated with the asset price. There are then 2 components to basis