The risk that arises because the value of the futures contract will not be perfectly correlated with the firm's exposure is called

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Basis risk arises because the value of the futures contract may not perfectly track the underlying asset being hedged. This can be due to differences in timing, delivery locations, and quality. Speculation risk refers to the risk that the futures contract may move in the opposite direction of the firm's exposure, while liquidity risk refers to the risk of not being able to enter or exit a futures contract at a desired price. Commodity price risk is the risk of fluctuations in the price of the underlying commodity being hedged.

The Risk That Arises Because the Value of the Futures