When commercial banks use financial futures contracts to hedge and avoid interest rate risk, basis risk will arise. Basis is the interest rate or price difference between spot market and futures market. Expressed by the formula: basis = spot market price (interest rate)-futures market price (interest rate).

If the basis changes when futures are opened or closed, banks may lose money in futures trading, reducing traders' income in the spot market. But generally speaking, the basis risk will be less than the interest rate risk in the spot market, which is also the reason why commercial banks and customers use financial futures trading to avoid interest rate risk.