![]() 970,922,182 visitors served. |
|
![]() Dictionary/ thesaurus | ![]() Medical dictionary | ![]() Legal dictionary | ![]() Financial dictionary | ![]() Acronyms | ![]() Idioms | ![]() Encyclopedia | ![]() Wikipedia encyclopedia | ? |
basis risk |
Also found in: Wikipedia | 0.03 sec. |
|
Basis Risk The risk that offsetting investments in a hedging strategy will not experience price changes in entirely opposite directions from each other. This imperfect correlation between the two investments creates the potential for excess gains or losses in a hedging strategy, thus adding risk to the position. Notes: Offsetting vehicles are generally similar in structure to the investments being hedged, but they are still different enough to cause concern. For example, in the attempt to hedge against a two-year bond with the purchase of Treasury bill futures, there is a risk that the Treasury bill and the bond will not fluctuate identically.Basis risk Unexpected changes in the basis between the placing and the lifting of a hedge. Basis risk is in excess of convergence.
|
|
? Mentioned in | ? References in periodicals archive | ||
|---|---|---|---|
| amp;nbsp; Barnaby says the reason farmers in areas like Kansas—that have suffered multiple-year droughts—are willing to accept this basis risk is because the APHs have declined and increased their premium rates to the point where the coverage being offered at the higher premium costs does not make good economic sense. Although basis risk has an expected value of zero, insurers will want to weigh the possibility of a significant recovery shortfall against the cost of other reinsurance alternatives. The scenarios include new increasing and decreasing USD LIBOR interest rate scenarios coupled with new basis risk stresses to compensate for transactions that fund FFELP CP and T-Bill based assets with USD LIBOR, taxable and tax-exempt auction rate securities in addition to the use of remarketing rate notes,' said Managing Director Claire Mezzanotte. |
| Free Tools: |
For surfers:
Browser extension |
Word of the Day |
Help
For webmasters: Free content NEW! | Linking | Lookup box | Double-click lookup | Partner with us |
|
|---|