basis risk
Noun
1. The possibility that a change in interest rate will cause a change in the yield on different rate-sensitive assets, liabilities and off-balance sheet items by a different magnitude, which occurs when the interest-rate relationship changes between the indices to which the assets and their funding are linked.
2. The risk that the value of a futures contract does not move in line with the spot underlying.
Synonym(s):
- spread risk (1.).
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