I'm going over April 2010 ST9 exam solution. as to question 7, the solution said: Basis risk - can be mitigated by ensuring that a sufficiently complex swap overlay is put in place both in terms of the various swap terms and underlying payment types. What does this exactly mean?
A single swap probably won't give you the hedge you want, so it just means that you use multiple swaps to achieve a closer hedge. Similar to using vanilla options to construct more complex exposures..
