Explain why a short hedger position improves

Reference no: EM133332091

Question: Clearly explain why a short hedger position improves when the basis strengthens unexpectedly and deteriorates when the basis weakens unexpectedly.

The executive of a biscuit factory has told their treasurer "there is no point in our using wheat futures". There is as much chance that the price of wheat in future will be less than the futures price, as there is that it will be greater than this price. Discuss the executive's viewpoint, if you were the treasurer what would you tell the executive.

Reference no: EM133332091

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