The residual risk that results from an imperfect risk offset or transfer process. For example, basis risk may arise from a hedge that pays off based upon an index while the exposure is an investment in a managed selection of individual stocks, or from a capital market hedge based upon industry-wide losses used to offset an insurer’s specific storm exposure. (ASOP No. 47)
CreativeMinds WordPress Plugin ASB Glossary
Print Friendly, PDF & Email