Vocabulary · Volume 1 and Volume 2

Basis risk

The gap between what a hedge's price index measures and what we pay for the hardware, region, terms, and dates we actually need. A position on an index offsets a bill only to the extent that the bill moves with the index.

The definition appears in the Volume 1 glossary and Volume 2 glossary. This page collects where the book uses the term and where the blog takes it up.