Basis risk occurs when the underlying security in the futures contract is not the same asset as the cash asset on the balance sheet.

Question

Quizplus · Accepted Answer

Basis risk occurs when there is a mismatch between the underlying asset in the futures contract and the cash asset on the balance sheet. This can lead to unexpected losses or gains due to changes in the price of the futures contract versus the price of the actual asset.

Basis Risk Occurs When the Underlying Security in the Futures