Basis - Financial definition
Concise definition of the term basis
Term designing the difference between the cash price of an instrument and the price of its respective future contract.
Comprehensive definition of the term basis
Cash - Futures = Basis
The basis is a key concept for the elaboration of trading strategies in financial markets. It is used with all types of supports, like interest rate products, commodities, equity indexes and more.
Certain organized markets package cash instruments and futures contracts quote bases as negotiable instruments on their own. When a basis instrument is traded, the transaction includes both the cash instrument (cash leg) and the corresponding futures contract (futures leg).
An example, therefore, would be Eurex Bonds, which offers basis trading on all deliverable bonds for the Schatz, Bobl, Bund, Buxl and BTP future contracts.
An example, therefore, would be Eurex Bonds, which offers basis trading on all deliverable bonds for the Schatz, Bobl, Bund, Buxl and BTP future contracts.