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