basis risk

Definition of "basis risk"
  1. The unexpected change in the difference between the price of a hedge and its covered asset before the hedge is removed
How to use "basis risk" in a sentence
  1. The company had to bear a significant basis risk when the price of the raw materials skyrocketed suddenly.
  2. The investor was aware of the basis risk involved with her hedge funds.
  3. Basis risk can significantly impact the potential returns from a hedge.

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