Basis Risk Can Best Be Defined As

question 257

Multiple Choice

Basis risk can best be defined as:

• A) A forward contract with the feature that gains and losses are realized each day rather than only on the settlement date.
• B) Hedging an asset with contracts written on a closely related, but not identical, asset.
• C) Risk that futures prices will not move directly with cash price hedged.
• D) An agreement by two parties to exchange, or swap, specified cash flows at specified intervals in the future.
• E) An agreement that gives the owner the right, but not the obligation, to buy or sell a specific asset at a specific price for a set period of time.