Basis risk is the risk that the prices or value of the underlying spot and the derivatives instrument used to hedge do not move predictably relative to one another.

Question

Quizplus · Accepted Answer

Basis risk arises when there's a mismatch between the hedge and the underlying asset, leading to the possibility that the hedge will not perfectly offset the risk in the underlying due to differences in their price movements.

Basis Risk Is the Risk That the Prices or Value