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Should the bank go short or long on the futures contracts to establish the correct hedge?

April 26, 2017Bank contracts Futures hedge short

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Should the bank go short or long on the futures contracts to establish the correct hedge?

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The treasury head decides to hedge the interest rate risk by taking a short position in the interest rate futures on NSE. Case 3: Calendar Spread Trading A long & short position in different futures contracts on the same underlying is called as a calendar spread. If a long position in a Sep 09 IRF contract versus a short position in the Dec 09 IRF contract on NSE is considered a calendar spread. Since a calendar spread entails only the basis risk, the bank runs little risk on the positions.