I am currently working in a team responsible for maintaining a simple risk application for our bond desk and I am interested in knowing how to provide some sort of basic basis risk metric.
Our desk mainly trades vanilla bonds which are hedged with bond futures. While I will not be implementing this, I am keen to know at a high level how this might be possible.
For example, if I have a German Bund maturing in ten years with a DV01 of 100 which I hedge with German Bund futures which also have a DV01 of 100, how might I calculate the basis risk between these two instruments.
Any references would also be appreciated.