All termsRisk, Position Sizing and Trade ManagementWorth knowing
Basis Risk
Basis risk is the risk that the instrument used to hedge an exposure does not move closely enough with the exposure being hedged.
Why it matters to you
A hedge may look perfect in theory while behaving differently in practice. Differences between spot and derivative prices, funding, contract structure or the assets being compared can leave residual risk.
Terms that sit next to this one
Tracking Error
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