Basis risk is the difference in the interest rates (or prices)of the same security between the cash market and the futures market.

Question

Quizplus · Accepted Answer

This is the definition of basis risk, which arises due to the mismatch in timing, location, or quality of the underlying asset between the cash and futures markets. Basis risk can be a concern for hedgers who use futures contracts to manage their exposure to changes in interest rates, commodity prices, or foreign exchange rates.

Basis Risk Is the Difference in the Interest Rates (Or