Explanation:

• A (Correct): Basis risk refers to the potential divergence between the expected value of a derivative instrument and the value of the underlying or hedged transaction. This arises due to differences in timing, pricing, or other factors.

• B (Incorrect): Liquidity risk pertains to the potential mismatch in the timing of cash flows between a derivative instrument and the underlying or hedged transaction, not the divergence in expected values.

• C (Incorrect): Systemic risk involves the broader implications of excessive risk-taking and leverage in derivative markets, rather than the specific divergence between derivative and underlying values.