23-77 What reflects the degree to which the rate on the option's underlying asset moves relative to the spot rate on the asset or liability that is being hedged?

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Basis risk reflects the degree to which the rate on the option's underlying asset moves relative to the spot rate on the asset or liability that is being hedged. It arises because the underlying asset and the hedged asset or liability may not be perfectly correlated. Credit risk refers to the risk of default on an obligation. Hedge risk is a general term that includes but is not limited to basis risk. Volatility refers to the degree of variation of prices over time. Open interest refers to the total number of outstanding contracts for a particular futures or options market.

23-77 What Reflects the Degree to Which the Rate on the Option's