What is ‘Narrow Basis’
A condition found in futures markets in which the spot price of underlying commodities is close to the futures price of the same contract.
Explaining ‘Narrow Basis’
A narrow basis suggests that the market is efficient, as the supply of and demand for the underlying commodity are in equilibrium.
The spot price and futures price should converge at maturity of the futures contract. If they don’t, there is an arbitrage opportunity.
Further Reading
- The structure of economic modeling of the potential impacts of climate change: grafting gross underestimation of risk onto already narrow science models – www.aeaweb.org [PDF]
- Financial deregulation, demand for narrow money and monetary policy in Australia – www.tandfonline.com [PDF]
- Economic evaluation of ultra narrow row cotton on a whole farm basis. – www.cabdirect.org [PDF]
- Trends in park tourism: Economics, finance and management – www.tandfonline.com [PDF]
- Credit markets and narrow banking – papers.ssrn.com [PDF]
- Modeling the demand for narrow money in the United Kingdom and the United States – www.sciencedirect.com [PDF]
