____ risk is the risk that the position being hedged by a futures contract is not affected in the same manner as the instrument underlying the futures contract.

Question

Quizplus · Accepted Answer

Basis risk occurs when the underlying asset being hedged does not move in the same direction as the futures contract being used for hedging. This can occur due to factors such as differences in delivery dates, quality or location of the underlying asset, or changes in supply and demand conditions. As such, basis risk is a type of price risk that can affect the effectiveness of a hedging strategy.

____ Risk Is the Risk That the Position Being Hedged