Basis risk in finance is the risk associated with imperfect hedging using futures. So
Basis = Spot price of hedged asset - Futures price of contract
Basis risk refers to the potential mismatch between the price movements of a hedging instrument and the underlying asset being hedged. It arises when there is a lack of perfect correlation between the two, leading to the risk that the hedging instrument may not fully offset the price movements of the underlying asset, resulting in financial losses. Basis risk is commonly encountered in derivative contracts and hedging strategies.
spot rate-mature rate=basis risk remaining basis=total basis*time proportion
what is Difference between wholesaler and retailer on the basis risk?
Basically, quantifying risks.
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A premium that is justified basis the amount of risk that an insured brings on to the insurer.
An actuarial basis is a calculated risk based on standard tables. For example, a life insurance premium is calculated on an actuarial basis depending on the persons age, sex, etc and their life expectancy.
What is the basis for the concept of risk pooling? The basis for the concept of risk pooling is to share or reduce risks that no single member could absorb on their own. Hence, risk pooling reduces a person or fim's exposure to financial loss by spreading the risk among many members or companies. Actuarial concepts used in risk pooling include: A. statistical variation.B. the law of averages.C. the law of large numbers.D. the laws of probability.
People run marathons on a regular basis. There is always a risk but the risk is lessened if you have trained up for 2 hours of distance running.
Bond valuation is determined on the basis of the economic condition and risk factor of the company
Basis Risk. This is the spot (cash) price of the underlying asset being hedged, less the price of the derivative contract used to hedge the asset.
Pulmonary disease secondary to fibers - the chronic classic is mesothelioma.