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The potential discrepancy in cash flow timing between a derivative instrument and its underlying asset is most accurately described as:
A
Basis risk, which refers to the divergence between the expected value of a derivative and its underlying or hedged transaction.
B
Liquidity risk, which arises from the mismatch in cash flow timing between a derivative instrument and its underlying or hedged transaction.
C
Systemic risk, which stems from excessive risk-taking and leverage in derivative markets, potentially leading to market stress.
