Learning objectives: Define and differentiate between short and long hedges and identify their appropriate uses. Describe the arguments for and against hedging and the potential impact of hedging on firm profitability. Define and calculate the basis, discuss various sources of basis risk, and...
Posting this here. About long and short hedges. https://forum.bionicturtle.com/threads/p1-t3-710-long-and-short-hedges-hull-chapter-3.10546/#post-77932
As per this thread short hedge means long basis which means that if the basis strengthens we gain. I.e. the logic is that b/c i go long the...
i am little confused with short&long hedge difference.
In the notes, it says short hedge is agreement to sell in the future.
In later notes, it says key difference is whether future price is determined.
What's the connection between these two statements?
e.g. for the coffee bean farmer...
This is a bit of fundamental but this part has always got me confused. Please correct me if I am not thinking in the right direction:
Consider a coffee producer who plans to sell 100 pounds of coffee on a future date under
two different scenarios:
To a key customer, the coffee producer...
Excerpt from notes:
Consider two scenarios for a coffee producer that plans to sell 100 pounds of coffee on a
1. To a key customer, the coffee producer promises to sell 100 pounds, on a date one
year in the future, at $3.00 per pound.
2. To a key customer, the coffee...