Basis Risk Refers to the Variable Spread Between a Lending

question 26

True/False

Basis risk refers to the variable spread between a lending rate and a borrowing rate, or between any two interest rates or prices.

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Definitions:

Primary Market

The market where securities are issued for the first time, allowing corporations to raise capital from investors.

Securities

Marketable securities embodying equity in publicly-operated corporations, claims of debt owed by governments or firms through bonds, or opportunities for ownership via options.

Original Sale

The first sale of an item or property after its initial acquisition or production.

Financial Engineering

The use of mathematical techniques to solve financial problems, including designing new financial products and strategies.