Basis Risk Explained Simply | Hedging Strategies

Dive into the complex world of commodities trading with "Basis Risk Explained Simply," where Ryan O'Connell, CFA, FRM, breaks down the essential differences between spot prices and forward prices. Discover the intricacies of hedging strategies and how they can lead to basis risk, even in seemingly perfect hedges. This video will provide a clear understanding of the fundamental concepts that govern the relationship between spot and forward prices in the commodities market.
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Chapters:
0:00 - What is "The Basis"?
1:16 - What is a Perfect Hedge?
3:25 - Basis Risk with a Perfect Hedge
5:13 - Basis Risk with an Imperfect Hedge
Disclosure: This is not financial advice and should not be taken as such. The information contained in this video is an opinion. Some of the information could be wrong. This channel is owned and operated by Portfolio Constructs LLC. Some of the links above are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.

[@RyanOConnellCFA]

📘 FRM Exam Prep Discount - AnalystPrep:
► Get 20% off FRM Part 1 and Part 2 complete courses with promo code "RYAN20". Explore here: analystprep.com/shop/frm-part-1-and-part-2-complete-course-by-analystprep/?ref=mgmymmr
🎓 Tutor With Me: 1-On-1 Video Call Sessions Available
► Join me for personalized finance tutoring tailored to your goals: ryanoconnellfinance.com/finance-tutoring/

[@tsunningwah3471]

You really save my life. My professor walked through these topic too quickly and the knowledge didnt have enough time to sink in my brain.

[@RyanOConnellCFA]

Awesome, really glad to hear that this was helpful for you!

[@pablomoure2963]

Very well explained !!

[@RyanOConnellCFA]

Thank you Pablo!

[@user-ng1ru6dn7j]

Amazingggg

[@user-ov2wk4oo1n]

The best 👍🏻

[@RyanOConnellCFA]

Thank you!

[@mphys5370]

Ryan, could you do a video of CFA vs FRM

[@RyanOConnellCFA]

Hello, you can find that video here: czcams.com/video/AmwEEeIa8zg/video.html

[@tsunningwah3471]

there is one point i dont get. Future price= spot price x e^rt by no arbitrage principle. so usually, future price should be greater than spot price?????? isnt it??

[@sarathprasad9112]

yes

[@RyanOConnellCFA]

Yes, you're correct! Under the no-arbitrage principle, the future price is typically greater than the spot price due to the exponential factor e^rt, where r is the risk-free rate and t is the time to maturity, accounting for the time value of money

[@bonerogg7413]

simple and clear

[@ivaberiashvili8827]

Nice beard

[@RyanOConnellCFA]

Thank you! I've been working on it 😂

[@divyaalok5538]

जय श्री राम🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏