Summary
Samenvatting Risk Management
- Course
- Institution
- Book
Samenvatting Risk Management 2015 Tilburg University Minor Finance
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
Risk Management UVT
-
Risk Management Summary
1 review
By: stefkolen • 7 year ago
Seller
Followveralamers
Reviews received
Content preview
Basic InformationGoing Long
When an investor goes long - that is, enters a contract by agreeing to buy and receive
delivery of the underlying at a set price - it means that he or she is trying to profit from an
anticipated future price increase.
Going Short
A speculator who goes short - that is, enters into a futures contract by agreeing to sell and
deliver the underlying at a set price - is looking to make a profit from declining price levels.
By selling high now, the contract can be repurchased in the future at a lower price, thus
generating a profit for the speculator.
The duration number is a complicated calculation involving present value, yield, coupon,
final maturity and call features. Fortunately for investors, this indicator is a standard data
point provided in the presentation of comprehensive bond and bond mutual
fund information. The bigger the duration number, the greater the interest-rate risk or reward
for bond prices.
LIBOR= The London Interbank Offered Rate is the average of interest rates estimated by each of
the leading banks in London that it would be charged were it to borrow from other banks
S = current price of stock
Su= Price in upstate
Sd= Price in downstate’
Underlying= The price of the underlying is the main factor that determines prices of
derivative securities, warrants and convertibles. Thus, a change in an underlying results in a
simultaneous change in the price of the derivative asset that is linked to it. In most cases,
the underlying is a security such as a stock (in the case of options) or a commodity (in the
case of futures)
1
,Chapter 1
What is Risk? - “A possible future event which if it occurs will lead to an undesirable
outcome.” - “Risk is the possibility of suffering loss.”
A hedge is a financial position – often a derivative - put on to reduce the impact of a
risk one is exposed to…”
Tactical Risk Management : Involves the hedging of contracts or other explicit
future commitments of the firm such as exchange rate risk. The treasurer of the firm
typically executes such tactical currency hedging without consideration of other
hedging or insurance activities carried out in the firm, even when the risks across
units are significantly correlated.
‘Strategic’ Risk Management (also called ‘Integrated Risk Management’)
Involves the identification and assessment of the collective risks that affect firm
value and the implementation of a firm-wide strategy to manage those risks. How
do exchange rate fluctuations affect the value of the entire firm as well as the firm’s
competitive environment, including the pricing of its products, the quantity sold, the
costs of its inputs, and the response of other firms within the same industry.
A call option is a security which conveys the right to buy a specified quantity of an
underlying asset at a contractually agreed price at or before a fixed date. A put
option is a security which conveys the right to sell a specified quantity of an
underlying asset at a contractually agreed price at or before a fixed date.
PUT Option
A forward contract is an agreement between 2 parties to buy (sell) a well-defined
asset at a pre-specified price at a well-defined future point in time. Positions: -
Long: obligation to buy - Short: obligation to sell
2
, Chapter 2
PDF CDF
3
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller veralamers. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.77. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
73918 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now