What does basis risk mean?
Definitions for basis risk
ba·sis risk
This dictionary definitions page includes all the possible meanings, example usage and translations of the word basis risk.
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Wikipedia
Basis risk
Basis risk in finance is the risk associated with imperfect hedging due to the variables or characteristics that affect the difference between the futures contract and the underlying "cash" position. It arises because of the difference between the price of the asset to be hedged and the price of the asset serving as the hedge namely b = S - F, before expiration, any difference at expiration will be offset by arbitrage. Other examples of aspects that may cause basis risk to arise: a) Quality - the hedge in place may have a different grade (which may not be perfectly correlated with the basis) b) Timing - a mismatch between the expiration date of the hedge asset and the actual selling date of the asset c) Location/Transportation Costs - due to the difference in the location of the asset to be hedged and the asset serving as the hedge, an unforeseen rise in transportation costs may cost the producer who hedges more money.
Numerology
Chaldean Numerology
The numerical value of basis risk in Chaldean Numerology is: 9
Pythagorean Numerology
The numerical value of basis risk in Pythagorean Numerology is: 8
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"basis risk." Definitions.net. STANDS4 LLC, 2024. Web. 21 Dec. 2024. <https://www.definitions.net/definition/basis+risk>.
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