...is a residual risk that arises because the movement in a spot (cash) asset's price is not perfectly correlated with the movement in the price of the asset delivered under a futures or forward contract.
A)Macro risk
B)Micro risk
C)Basis risk
D)Duration risk

Question

Quizplus · Accepted Answer

Basis risk arises from the difference between the spot price and the futures price, and the risk that this difference will change adversely. This risk can arise due to factors such as changes in supply and demand, storage costs, interest rates, and other market conditions that affect the commodity's cash price and the futures price.

Is a Residual Risk That Arises Because the Movement in a Spot