basis risk


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Basis risk

Unexpected changes in the basis between the placing and the lifting of a hedge. Basis risk is in excess of convergence.

Basis Risk

The risk that a change in prevailing interest rates will change the price of a company's or investor's interest-bearing liabilities disproportionate to the price of interest-bearing assets. This would increase liabilities and decrease assets, resulting in a loss.

basis risk

The possibility that a commodity contract's basis will move against the investor. For example, an investor may buy a spot contract and sell short a higher-priced futures contract on the same commodity in expectation of a narrowing of the basis but may find that the basis widens instead.
References in periodicals archive ?
Two newly engendered risks, basis risk (the risk created by the fact that the return from the financial derivative is a function of weather at a prespecified geographical location which may not be identical to the location of the firm) and credit risk (the risk that the counterparty to the derivative contract may not perform), are analyzed in this article.
From time to time, if the net WAC limitation is applied to the Class A Bond Rate, a Basis Risk Shortfall Amount (as defined in the transaction documents) will occur with respect to the Class A Bonds.
What you've done is take some basis risk between the type of portfolio that he or she runs and the index return you're paying away.
NEW YORK -- Link to Fitch Ratings' Report: Basis Risk in FFELP ABS Transactions http://www.
34%), the net loan interest rate helps to minimize basis risk as well as to build up cash in the program.
Fitch used its 'Global Structured Finance Rating Criteria' and 'FFELP Student Loan ABS Rating Criteria', as well as the refined basis risk criteria outlined in Fitch's Sept.
4 million provides liquidity and a basis risk reserve of $260,000 protects the class B.
The surveillance approach is primarily based on the analysis of the basis risk exposure.
Fitch 'Global Structured Finance Rating Criteria' and 'FFELP Student Loan ABS Rating Criteria, as well as the refined basis risk criteria outlined in Fitch's Sept.
Fitch used its 'Global Structured Finance Rating Criteria' and 'FFELP Student Loan ABS Rating Criteria, as well as the refined basis risk criteria outlined in Fitch's Sept.
The rating on the subordinate note is downgraded to 'BBsf' because a mild level of basis risk stress will limit the trust's ability to generate excess spread and reach and maintain a parity of 100%.
The rating on the subordinate note is downgraded to 'BBB-sf' due to the trust's relatively high cost structure towards the tail end of the transaction that will put pressure on the trust's ability to generate excess spread (which is the only form of credit enhancement for the subordinate note) and absorb a stressed level of basis risk.