Basis risk

{
  "id": "MLC-T-INS-000537",
  "term": "Basis risk",
  "field": "Insurance and risk management",
  "definition": "The risk that the value of a hedging instrument will not perfectly offset the value of the underlying asset or liability being hedged. This mismatch can arise from differences in the characteristics of the hedged item and the hedging instrument, such as maturity dates, credit quality, or reference indices. Basis risk can lead to unexpected gains or losses in a hedging strategy, even if the general market direction is correctly anticipated.",
  "url": "https://mlchart.com/terminology/insurance/basis-risk/"
}