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calendar basis spread

English translation: spread between two futures maturities

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20:18 Mar 28, 2004
English to English translations [PRO]
Bus/Financial - Finance (general) / Futures
English term or phrase: calendar basis spread
Regarding single stock futures:

Using the XXX model you can calculate a ***calendar basis spread***

Is it the same as "calendar spread"? If it is, what does it mean that you can calculate it?

Here is the meaning of "calendar spread":
An option strategy involving the simultaneous purchase and sale of options of the same class and strike price but different expiration dates.
(From: www.investorwords.com)

Thanks a billion for any help.
Laura Vinti
United States
Local time: 16:05
English translation:spread between two futures maturities
Explanation:
Not surprisingly I would need more detailed information...
My take on it - given the SSF context - is a spread between two different futures maturities. One definition of basis is the difference between the cash market price of the underlying instrument and the forward price implied by the futures contract. Two different maturities should usually have different prices - the price difference (=spread) implies the basis difference between the two (which is defined by the different cash flows, mainly financing costs on the one hand and dividends - if any - on the other). Calculating the spread means computing the theoretical price difference, given (1) the price of the underlying instrument; (2) period interest rates for the different maturities, and for the spread term; (3) expected dividends received (if any); and (4) borrowing costs vs. lending income.

HTH, Ralf
Selected response from:

Ralf Lemster
Germany
Local time: 22:05
Grading comment
Thank you a bunch Ralf - your support and expertise are always of great help!
4 KudoZ points were awarded for this answer

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Summary of answers provided
3 +3spread between two futures maturities
Ralf Lemster


Discussion entries: 4





  

Answers


40 mins   confidence: Answerer confidence 3/5Answerer confidence 3/5 peer agreement (net): +3
spread between two futures maturities


Explanation:
Not surprisingly I would need more detailed information...
My take on it - given the SSF context - is a spread between two different futures maturities. One definition of basis is the difference between the cash market price of the underlying instrument and the forward price implied by the futures contract. Two different maturities should usually have different prices - the price difference (=spread) implies the basis difference between the two (which is defined by the different cash flows, mainly financing costs on the one hand and dividends - if any - on the other). Calculating the spread means computing the theoretical price difference, given (1) the price of the underlying instrument; (2) period interest rates for the different maturities, and for the spread term; (3) expected dividends received (if any); and (4) borrowing costs vs. lending income.

HTH, Ralf

Ralf Lemster
Germany
Local time: 22:05
Specializes in field
Native speaker of: German
PRO pts in category: 143
Grading comment
Thank you a bunch Ralf - your support and expertise are always of great help!

Peer comments on this answer (and responses from the answerer)
agree  Vicky Papaprodromou
1 min

agree  Mario Marcolin
9 hrs

agree  chopra_2002
15 hrs
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