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.

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Definitions:

Input Mask

An input mask is a template that dictates the allowed format and type of data entry into a field, like enforcing phone number or date formats in a form.

Format

The arrangement, style, or structure of text, data, or a document.

Decimal Places

The number of digits to the right of the decimal point in a number, indicating the precision of the value.

Primary Key

A unique identifier used in databases to distinguish each record or row in a table.