Is Basis Risk Present in Both Physically-Settled and Cash-Settled Futures?

Yes, basis risk is present in both types of futures contracts. For physically-settled contracts, basis risk is related to the difference between the local spot price of the hedger's asset and the price at the specified delivery location.

For cash-settled contracts, it relates to the difference between the hedger's spot price and the index or reference rate used for settlement. The nature of the divergence differs, but the risk of imperfect offset remains.