________ in a swap refers to the risk arising from the difference in the interest rate defined in the terms of a swap and the interest rates of the assets and liabilities held by the parties to swap.

Question

Quizplus · Accepted Answer

Basis risk in a swap arises from the mismatch between the interest rate defined in the swap agreement and the actual interest rates of the assets and liabilities held by the parties involved in the swap. This can lead to a situation where the swap does not perfectly hedge the interest rate exposure of those assets and liabilities.

________ in a Swap Refers to the Risk Arising from the Difference