Which of the Following Is the Best Definition of Basis

question 240

Multiple Choice

Which of the following is the best definition of basis risk?

• A) Risk that futures prices will not move directly with cash price hedged.
• B) An option that gives the owner the right, but not the obligation, to buy an asset.
• C) A contract that pays off when a credit event occurs, default by a particular company termed the reference entity, giving the buyer the right to sell corporate bonds issued by the reference entity at their face value.
• D) Hedging an asset with contracts written on a closely related, but not identical, asset.
• E) A financial asset that represents a claim to another financial asset.

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Definitions:

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