n NISM Certifications
NSM General NISM
Medium

'Basis Risk' refers to differential price changes in _______.

Practice question from NISM Series IV - Mock Test 3 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Cash prices and future prices

  2. B

    Different tenors of interest rates

  3. Both 1 and 2

    Correct answer

  4. D

    None of the above

Why this is the answer

Basis risk arises due to mismatches in contract sizes or maturity dates, causing imperfect hedges between futures and cash instruments or across tenors.

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