## What does the Concept of "Basis Convergence" Refer to?

Financing costs and income must be calculated for the term of the futures transaction.

The impact of cost of carry, and therefore of the basis effect, diminishes as the futures contract approaches maturity. This procedure is known as basis convergence.

Basis Convergence = Forward and cash prices converge

The forward price and cash price are identical upon maturity of the future.

Maturity: Forward price = Cash price