Question Details

	Username: PrettyWoman Rating: Asked to: Anton Luyten Date Created: 25 Jan 2018
Category	28
Tag	Financial
Question	What is 'Basis Risk'?

Advice from Guru

Hello PrettyWoman,

Basis risk is the financial risk that offsetting investments in a hedging strategy will not experience price changes in entirely opposite directions from each other. This imperfect correlation between the two investments creates the potential for excess gains or losses in a hedging strategy, thus adding risk to the position.

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