basis-risk

Can Basis Risk be explained with an example , on how the risk is calculated(basis risk that is) when the Price of the "Exposure" and "Hended Product" goes out of sync. Could this be explained with a detailed and a simple example please.

Basis = Spot price - Futures price; i.e., b(0) = S(0) - F(0, t). Unexpected weakening (strengthening) of the basis helps (hurts) the long hedger. David's XLS is here: https://www.dropbox.com/s/m8gu9f3hc5ql7fq/030718-forward-basis.xlsx?st=xr9ml553&dl=0

Hello, I would like to ask a question regarding P1.T3 Page 39. In the example for strengthening on May, basis is ($0,10), then there are two scenarios discussed in columns, weakening and strengthening scenario. Under Basis Weakening Scenario, Basis is stated as ($0,05) and Basis Strengthening...

David: Couple of nagging ones (for me): 1. Does basis risk apply only in a cross-hedge? When the hedging asset (e.g. crude oil) is different from the underlying asset (e.g. jet fuel?) 2. I am a little confused about some of the prices used in the illustration of the basis risk. May I...