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Assume there are two ways to hedge an exposure in two years time, either hedge by rolling two one-year future contract forward, or hedge using

Assume there are two ways to hedge an exposure in two years time, either hedge by rolling two one-year future contract forward, or hedge using a two-and-half-year future contract, and close out the position in two years. The former one is better since there is no maturity mismatch, and the basis risk is zero.

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