Hedging Using Futures Contracts Notations S÷ spot price at ti S,: spot price at t, Fi: futures price at tr F2: futures price at t2 bj: basis risk at tr b,: basis risk at t, t: the first day of the hedge(open the position) the last day of the hedge close out the position) Charles cao 1111 Charles Cao Hedging Using Futures Contracts ◼ Notations: S1 : spot price at t1 S2 : spot price at t2 F1 : futures price at t1 F2 : futures price at t2 b1 : basis risk at t1 b2 : basis risk at t2 t1 : the first day of the hedge (open the position) t2 : the last day of the hedge (close out the position)