4. Explain the basis risk by deriving the effective price of a long hedge in the following order. However, the starting point of hedging is t1, and the ending point is t2. The expiration time of futures is denoted by T, spot prices at each point in S1, S2, St, and futures prices in F1, F2, Ft.

(1) Result if t1 = T (completely hedged)

* Cost of purchasing assets:

Profit or Loss of a Buy Futures Contract:

Effective price (total cost):

(2) result if t2 < T (incomplete hedge)

* Cost of purchasing assets:

* Profit/Loss of Buy Futures Contract:

* Effective price (total cost):