basis risk
Basis risk is the difference between an index and a specific portfolio of losses (relying upon that index) as the underlying basis for a hedge.
basis risk
Basis risk is the difference between an index and a specific portfolio of losses (relying upon that index) as the underlying basis for a hedge.
Additional Information
For example, insurer A's loss portfolio will not be the same as the index used to calculate the price of the security purchased to hedge the loss portfolio. Basis risk results from an imperfect hedge.
