4.7 Long hedge Suppose that f: nitial futures price F 2 Final futures Price S2: Final Asset Price You hedge the future purchase of an asset by entering into a long futures contract Cost of Asset=S2-F2-F1=F1+ Basis Options, Futures, and other Drerivatives, 5th edition o 2002 by John C. HullOptions, Futures, and Other Drerivatives, 5th edition © 2002 by John C. Hull 4.7 Long Hedge • Suppose that F1 : Initial Futures Price F2 : Final Futures Price S2 : Final Asset Price • You hedge the future purchase of an asset by entering into a long futures contract • Cost of Asset=S2 –(F2 – F1 ) = F1 + Basis