Basis risk
FRM Part 1 glossary · Financial Markets And Products
Definition
Residual risk caused by imperfect co-movement between an exposure and the instrument used to hedge it.
Basis risk in plain English
Basis can arise from differences in asset, location, grade, maturity, reset date, or benchmark.
Learn these first
Related FRM Part 1 terms
FRM Part 1 practice questions · FRM Part 1 flashcards · FRM Part 1 study guide