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This can also be written as the initial futures price plus the final basis:0:7800þ ð±0:0050Þ ¼0:7750The total amount received by the company for the 50 million yen is 50²0:00775million dollars, or $387,500.Example 3.2It is June 8 and a company knows that it will need to purchase 20,000 barrels ofcrude oil at some time in October or November. Oil futures contracts are currentlytraded for delivery every month on the NYMEX division of the CME Group andthe contract size is 1,000 barrels. The company therefore decides to use theDecember contract for hedging and takes a long position in 20 December con-tracts. The futures price on June 8 is $68.00 per barrel. The company finds that itis ready to purchase the crude oil on November 10. It therefore closes out itsfutures contract on that date. The spot price and futures price on November 10are $70.00 per barrel and $69.10 per barrel.The gain on the futures contract is 69:10±68:00¼$1:10 per barrel. The basiswhen the contract is closed out is 70:00±69:10¼$0:90 per barrel. The effectiveprice paid (in dollars per barrel) is the final spot price less the gain on thefutures, or70:00±1:10¼68:90This can also be calculated as the initial futures price plus the final basis,68:00þ0:90¼68:90The total price paid is 68:90²20,000¼$1,378,000.3.4CROSS HEDGINGIn Examples 3.1 and 3.2, the asset underlying the futures contract was the same as theasset whose price is being hedged.Cross hedgingoccurs when the two assets aredifferent. Consider, for example, an airline that is concerned about the future priceof jet fuel. Because jet fuel futures are not actively traded, it might choose to use heatingoil futures contracts to hedge its exposure.