Basis risk

• Is the risk in the basis time series. This can be influenced by many variables although the total impact is less than the exposure for a naked position. When a hedge is placed, price risk is transformed into basis risk. Basis risk is substantially less than price or inventory risk in terms of dollars.

• The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for price risk.


Follow this link for all the terms related to risk.

 Embedded terms in definition
Naked position
Price risk
 Related Terms
Accrual basis
Adjusted basis
Affiliate risk
Agency basis
Bank discount basis
Bankruptcy risk
Basis point
Basis price
Basis swap
Best efforts basis
Bond equivalent basis
Business and industry risk
Business risk
Call risk
Cash basis
Commercial risk
Company specific risk
Completion risk
Cost basis
Counterparty risk
Country economic risk
Country financial risk
Country risk
Country risk analysis models
Credit risk
Cross border risk
Currency risk
Currency risk sharing
Default risk
Discount basis
Discounted basis
Diversifiable risk
Economic risk
Equilibrium market price of risk
Event risk
Exchange rate risk
Exchange rate risk capital budgeting
Exchange risk
Expected basis
Fallout risk
Financial risk
Firm specific risk
Fixed price basis
Flat price risk
Flow through basis
Force majeure risk
Forecasting risk
Foreign exchange fx risk
Foreign exchange risk
Formula basis
Funding risk
Geographic risk
Herstatt risk
Idiosyncratic risk
Inflation risk
Insolvency risk
Interest rate risk
Interest rate risk management
Liquidity risk
Long the basis
Macro political risk
Market price of risk
Market risk
Market risk return function
Micro political risk
Mortality risk
Mortgage pipeline risk
Nondiversifiable risk
Nonnotification basis
Nonrecourse basis
Nonsystematic risk
Notification basis
Operating risk
Operational risk
Overnight delivery risk
Pin risk
Political risk
Prepayment risk
Price risk
Price value of a basis point
Product risk
Purchasing power risk
Rate risk
Regulatory pricing risk
Reinvestment risk
Residual risk
Reverse price risk
Risk adjusted discount rate
Risk adjusted profitability
Risk adjusted return
Risk arbitrage
Risk arrays
Risk averse
Risk capital budgeting
Risk classes
Risk controlled arbitrage
Risk free asset
Risk free rate
Risk indexes
Risk indifferent
Risk lover
Risk management
Risk management document
Risk neutral
Risk of technical insolvency
Risk premium
Risk premium approach
Risk prone
Risk return tradeoff
Risk reversal
Risk seeking
Risk transformation
Risk types
Riskless or risk free asset
Settlement risk
Short the basis
Shortfall risk
Sovereign risk
Specific risk
Systematic risk
Systematic risk principle
Tax basis
Theta risk
Total risk
Undiversifiable risk
Unique risk
Unsystematic risk
Value at risk
Value at risk model
Vega risk
Volatility risk

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