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elearning > Basis risk
Learn about the following:
What basis risk is. How basis risk can affect you. How basis risk can be measured. How basis risk can be hedged. The problems with basis swaps.
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Course Summary
Basis Risk
- What basis risk is
- How basis risk can affect you
- How basis risk can be measured
- How basis risk can be hedged
- The problems with basis swaps
30 minutes
8 question multiple choice test
1. What basis risk is
- How retail financial institutions incur basis risk
- Example, Libor-Bank rate mismatch
- The implications of a mismatch
- How this can lead to gains and losses
- The “normal” situation
- What happened in 2007-8
- How this can lead to large windfall gains or losses
- Affect on customers and administered rates
2. Measuring basis risk
- Basis mismatch reporting
- Example of a simple report
- Categories of interest rate
- Net exposures
- What this tells you about your risk
- Quantification with a basis point value
- Strengths & weaknesses
3. Managing basis risk
- Natural hedges
- Basis swaps
- Difficulties with basis swaps
- Mark-to-market
- Market liquidity
4. Summary
5. Test
Related Documents
Market Guides > Gap reports - how do you use them? 
14th October 2009
Gap reports show you the interest rate risk you are running in your balance sheet. They put the assets and liabilities into time buckets in accordance with their interest rate repricing. From this simple approach you can obtain a table or graph of the risk being run. This normally includes a profit and loss figure that results from moving the yield curve. Gap limits are also applied in order to keep the interest rate exposure within risk tolerence. Gap reports aren't new; they are widely used and have both strengths and weaknesses. Let's find out more.
Basis Risk 
7th November 2008
Basis risk occurs when you pay one interest index and receive another. The following looks at just one aspect of a particular type of basis risk. The reference currency is GBP. Similar issues occur for retail institutions whose base currency is EUR or USD.
Market Risk Training Course
elearning > Basis point value 
Learn about the following: What basis point value is. How it is calculated. What influences basis point value. How firms use basis point value. The strengths and weaknesses of basis point value.
elearning > Currency basis swaps
Learn about the following: What a currency basis swap is. How currency basis swaps work. How to read the price quotation. How these swaps influence the price of other deals.