Which of the following statements is true?
A)The variable spread between a lending rate and a borrowing rate, or between any two interest rates or prices is called basis risk.
B)The variable spread between a lending rate and a borrowing rate, or between any two interest rates or prices is called spread risk.
C)The variable spread between a lending rate and a borrowing rate, or between any two interest rates or prices is called interest spread risk.
D)The variable spread between a lending rate and a borrowing rate, or between any two interest rates or prices is called funding risk

Question

Quizplus · Accepted Answer

Basis risk refers to the risk that the spread between two interest rates or prices will change, affecting the outcome of hedging or investment strategies.

Which of the Following Statements Is True