The minimum acceptable quality of a commodity for delivery on a futures contract. The basis grade must be described in the contract, and can strongly affect the price. To use an extreme example (unlikely in real life), a futures contract for rotten corn would be worth less than one for high-quality corn. In both cases, however, the basis grade is described in the contract itself.
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The specified grade for a commodity necessary for it to be acceptable for delivery on a futures contract.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.