How Can Basis Risk Arise in an FI's Operations

question 15

Multiple Choice

How can basis risk arise in an FI's operations?

• A)Basis risk arises because loan rates and deposit rates are inversely related in their movements over time.
• B)Basis risk arises because loan rates and deposit rates are perfectly correlated in their movements over time.
• C)Basis risk arises because loan rates and deposit rates are not correlated in their movements over time.
• D)Basis risk arises because loan rates and deposit rates are not perfectly related in their movements over time.

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