One Reason for Basis Risk in an Interest Rate Swap

question 75

True/False

One reason for basis risk in an interest rate swap is that changes in the index on the variable rate portion of the swap may not be perfectly correlated with changes in the index on the balance sheet portion of the liabilities.

---

Definitions:

Glomerular Filtrate

Glomerular filtrate refers to the fluid that passes from the blood into the Bowman's capsule in the kidneys during the filtration process of the urinary system.

Glomerulus

A network of capillaries located at the beginning of a nephron in the kidney, responsible for filtering blood to form urine.

Filtration Rate

A measurement of the volume of fluid that passes through a filter or a membrane within a specified time period.

Distal Convoluted Tubule

A portion of the kidney nephron that plays a role in the reabsorption of water and ions from the filtrate, contributing to the regulation of blood pressure, pH, and electrolyte balance.