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Question 3 a) What is meant by basis risk when futures contracts are used for hedging? (4 marks) b) What is the price obtained for

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Question 3 a) What is meant by basis risk when futures contracts are used for hedging? (4 marks) b) What is the price obtained for the asset sold in case of short hedging? What is effective price paid with long hedging? How those two prices depend on basis risk? Explain your answer using formulas. (6 marks)

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