risco de base
Risco de Base é o risco de dois preços que deveriam se mover juntos, como sua proteção e o que ela protege, se afastam e deixam você exposto de qualquer forma.
Automatically translated. Read the original in English.
In plain English
The generator seller in Ladipo market had a clever plan. He priced his generators in dollars but collected naira, so he kept a small stash of dollars aside from customer payments to cover his next container order from China.
One month, the naira fell against the dollar the way everyone expected, but not by the same amount his supplier's price moved. The supplier's cost rose faster than the naira weakened, because shipping costs and Chinese input prices had jumped too. His dollar stash covered part of the gap, but not all of it. He had hedged against currency movement, yet still lost money, because the two things he was tracking, the naira dollar rate and his actual landed cost, did not move in perfect step.
That gap between what you hedge and what you are actually exposed to is basis risk. It shows up whenever your protection is close to your risk, but not identical to it. A Nigerian farmer who sells maize might use a futures contract priced on maize grown in another region, and if his local price and that reference price diverge, the hedge does not fully protect him.
In the United Kingdom, a pension fund holding corporate bonds might hedge interest rate risk using government bond futures. Government bond yields and corporate bond yields usually move together, but not always by the same margin, especially when companies face specific troubles. That small, stubborn gap is the basis, and its unpredictable wobble is the risk.
Even someone sending money home from London feels a cousin of this. You lock in an exchange rate with one provider, but your relative in Lagos still faces local price rises that your transfer did not fully anticipate. The lesson is humble, no hedge is a perfect twin of your risk, it is only a close relative.
Adaeze runs a bakery and buys flour priced off wheat futures to protect against rising costs. Wheat futures rise by ₦2,000 per bag equivalent, but her actual flour supplier raises prices by ₦2,800 per bag, because of extra milling and transport costs. That ₦800 gap per bag is basis risk, her hedge helped, but did not cover her fully.
Questions people ask
Is basis risk the same as just being unhedged?
No. Being unhedged means you have no protection at all. Basis risk happens even when you do have a hedge, it just is not a perfect match for your exact exposure, so some risk still slips through.
Can basis risk ever work in your favour?
Yes, sometimes the gap moves your way and your hedge ends up covering more than your actual loss, giving you a small unexpected gain. It cuts both ways, which is exactly why it is called risk rather than a guaranteed shortfall.
How do investors try to reduce basis risk?
They choose hedging instruments as close as possible to their actual exposure, such as matching currency, maturity, and underlying asset closely, though a perfect match is rare, which is why basis risk rarely disappears completely.
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