Basis Risk Refers to the Risk

question 81

Multiple Choice

Basis risk refers to the risk:

• A) associated with anticipated price movements in the cash market.
• B) associated with unanticipated price movements on the underlying asset.
• C) of default on the futures contract.
• D) from a change in the spread between the price on the commodity or financial security in the physical market and the price of the related futures contract.

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Definitions:

Net Decrease

This represents the overall reduction in a specific financial position or quantity over a period, after accounting for all increases and decreases.

Cash Flow Per Share

The cash flow from operations divided by the number of common shares outstanding.

Statement Of Cash Flows

A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year.

Bonds Payable

Long-term liabilities representing borrowed funds that a company is obligated to repay to bondholders at a specified maturity date.