Basis risk is about an unexpected weakening or strengthening (FRM T3-5)

[@HowsItTripping]

love the video, really helped me understand basis risk better

[@erikbeier9515]

Would’ve been great to hear how to mitigate basis risk but great video

[@oxfordg.5857]

Very useful video but somehow I am a bigger fan of your old videos.

[@bionicturtle]

why?

[@apsrinivasan1606]

Does that mean hedging is meaningless? i.e. I enter into the futures contract thinking I've locked in a price so don't have to worry about future gain/loss - but any unexpected strengthening in the basis makes this whole act of trying to hedge meaningless?

[@IvanVesely920]

Meaningless? Well with hedging you might win, you might lose, but most importantly, you feed a large portion of the financial services industry!

[@danielgorringe2311]

Hedging isn't meaningless as you have still removed price risk. Now only basis risk exists. Overall total risk has gone down.

[@pothuriharish1433]

Hi David, thanks for the detailed explanation. Can I say keeping a regular check on Hedge variance ratio helps to bring down basis risk even though same underlying commodity but different expiry/ maturity? As HVR is good for short movements, can you please state some metrics used for hedging long term?