Basis risk refers to the risk: A. associated with anticipated price movements in the cash market. B. associated with unanticipated price movements on the underlying asset. C. of default on the futures...
Basis risk refers to the risk:
A. associated with anticipated price movements in the cash market.
B. associated with unanticipated price movements on the underlying asset.
C. of default on the futures contract.
D. from a change in the spread between the price on the commodity or financial security in the physical market and the price of the related futures contract.
Homework Answers
Basis risk is the risk arising out of the difference between the cash market and futures market. This is a risk because futures price may vary differently over time in relation to cash market price. Therefore answer is option d
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