basis risk


Basis risk

Unexpected changes in the basis between the placing and the lifting of a hedge. Basis risk is in excess of convergence.

Basis Risk

The risk that a change in prevailing interest rates will change the price of a company's or investor's interest-bearing liabilities disproportionate to the price of interest-bearing assets. This would increase liabilities and decrease assets, resulting in a loss.

basis risk

The possibility that a commodity contract's basis will move against the investor. For example, an investor may buy a spot contract and sell short a higher-priced futures contract on the same commodity in expectation of a narrowing of the basis but may find that the basis widens instead.