1. What is basis risk? Explain the circumstances that give rise to basis risk. 2. What is marked to market? 3. Explain what is meant by open interest. a. Why does the open interest usually decline during the month preceding the delivery month? b. On a particular day there are 2,000 trades in a particular futures contract. Of the 2,000 traders on the long side of the market, 1,400 were closing out position and 600 were entering into new positions. Of the 2,000 traders on the short side of the market, 1,200 were closing out position and 800 were entering into new positions. What is the impact of the day's trading on open interest?