Study sets matching "management financial risk"

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Study sets matching "management financial risk"

Financial Risk Management
What is back testing
What are two of VAR's benefits
A credit default swap is such that the…
The risk neutral is _______ compared t…
A procedure that compares the banks internally figured VAR fi…
it is easy to communicate and understand and allows the firm…
the present value of expected loss from default
higher
What is back testing
A procedure that compares the banks internally figured VAR fi…
What are two of VAR's benefits
it is easy to communicate and understand and allows the firm…
26 terms
FINANCIAL ADMIN- RISK MANAGEMENT
RISK MNGMT- GASB10
CLAIMS>PREMIUMS
CLAIMS<PREMIUMS
RISK TRANSFER-INSURER
MANAGING AN ORGANIZATION'S ACTIVITIES TO MINIMIZE ADVERSE EFF…
LOSS
GAIN
ASSUMES RISK AND SETS PREMIUMS ACCORDINGLY
RISK MNGMT- GASB10
MANAGING AN ORGANIZATION'S ACTIVITIES TO MINIMIZE ADVERSE EFF…
CLAIMS>PREMIUMS
LOSS
77 terms
Risk Management in Financial Institutions
Credit Risk
Liquidity Risk
Interest Rate Risk
Market Risk
the risk promised cash flows from loans and securities held b…
the risk that a sudden and unexpected increase in liability w…
the risk incurred by an FI when the maturities of its assets…
the risk incurred in trading assets and liabilities due to ch…
Credit Risk
the risk promised cash flows from loans and securities held b…
Liquidity Risk
the risk that a sudden and unexpected increase in liability w…
12 terms
Risk Management for Financial Institutions
Arrow-Debreu Security
Aggregate Risk
Measures of Risk
Assumptions of the Capital Asset Prici…
A security that pays out 1 if a given state of nature occurs,…
Risk that cannot be diversified away through financial transa…
Risk can be measured through volatility (standard deviation w…
Static (investors care about one-period returns), unlimited b…
Arrow-Debreu Security
A security that pays out 1 if a given state of nature occurs,…
Aggregate Risk
Risk that cannot be diversified away through financial transa…
Chapter 16 - Financial Risk Management
American Option
Arbitrage
Bermuda Option
Bid Offer Quotes
A type of option contract that can be executed or settled on…
The process by which an asset is purchased in one financial m…
Type of option contract that is exercisable on on specified d…
Price Quote in which a dealer or other entity provides both t…
American Option
A type of option contract that can be executed or settled on…
Arbitrage
The process by which an asset is purchased in one financial m…
Financial Risk Management
Derivative
Futures contract
Spot contract
Long position
An instrument whose value depends on thr value of other more…
Agreement to buy or sell an asset at a certain time in the fu…
Agreement to buy or sell an asset immediately, or within a ve…
Party who has agreed to buy/ bought the option
Derivative
An instrument whose value depends on thr value of other more…
Futures contract
Agreement to buy or sell an asset at a certain time in the fu…
73 terms
Financial Risk Management
3 Categories of Financial Risk
Interest Rate Risk
FX Risk
3 Types of FX Risk
Interest Rate Risk;... FX Risk;... Commodity Price Risk
The risk related to changes in investment values or borrowing…
Exposure an organization has as a result of transactions, ass…
Economic; ... transaction;... translation
3 Categories of Financial Risk
Interest Rate Risk;... FX Risk;... Commodity Price Risk
Interest Rate Risk
The risk related to changes in investment values or borrowing…
Financial Risk Management
3 Categories of Financial Risk
Interest Rate Risk
FX Risk
3 Types of FX Risk
Interest Rate Risk;... FX Risk;... Commodity Price Risk
The risk related to changes in investment values or borrowing…
Exposure an organization has as a result of transactions, ass…
Economic; ... transaction;... translation
3 Categories of Financial Risk
Interest Rate Risk;... FX Risk;... Commodity Price Risk
Interest Rate Risk
The risk related to changes in investment values or borrowing…
92 terms
Management of Financial Risk
Derivative... Chap 1
Derivative products... Chap 1
derivatives exchange... Chap 1
Chicago Board Options Exchange... Chap 1
financial instrument whose value depends on (or derives from)…
created from portfolios of risky mortgages in the United Stat…
is a market where individuals trade standardized contracts th…
Trades Options
Derivative... Chap 1
financial instrument whose value depends on (or derives from)…
Derivative products... Chap 1
created from portfolios of risky mortgages in the United Stat…
18 terms
Financial decisions & Risk management
Finance Management
Financial Managers
Financial planning
Financial Control
The business function involving decisions about firms conside…
Are responsible for planning and overseeing financial resourc…
Description of how a business will reach some financial posit…
process of checking actual performance against plans to ensur…
Finance Management
The business function involving decisions about firms conside…
Financial Managers
Are responsible for planning and overseeing financial resourc…
24 terms
Risk Management/Financial Analysis
Risk
Natural Risk, Human Risk, Economic Risk
Risk Assessment
Risk Management
the possibility of financial gain, loss, or personal injury
Three Sources of Risk
a step-by-step process by which knowledgeable safety and secu…
preventing, reducing, or lessening negative
Risk
the possibility of financial gain, loss, or personal injury
Natural Risk, Human Risk, Economic Risk
Three Sources of Risk
BEC - financial risk management
risk indifferent behavior
risk-averse behavior
risk seeking behavior
diversifiable risk
highest return no matter the risk ... - increase level of risk d…
increase in the level of risk results in an increase in manag…
increase in the level of risk results in a decrease in manage…
nonmarket, unsystematic, firm specific
risk indifferent behavior
highest return no matter the risk ... - increase level of risk d…
risk-averse behavior
increase in the level of risk results in an increase in manag…
38 terms
Financial Risk Management
Currency diversivification. Even thoug…
address the issue of appropriate cours…
Evaluates operating decisions.
Technique used in project management t…
Holding payables and receivables due in the same currency/amo…
Probability and expected value formulate quantitative models…
Cost volume profit analysis:
PERT:
Currency diversivification. Even thoug…
Holding payables and receivables due in the same currency/amo…
address the issue of appropriate cours…
Probability and expected value formulate quantitative models…
70 terms
Financial Risk Management
Objective risk
Subjective risk
Chance of loss
Objective probability
the relative variation of actual loss from expected loss
uncertainty based on a persons mental condition or state of m…
the probability that an event will occur
the long-run relative frequency of an event assuming an infin…
Objective risk
the relative variation of actual loss from expected loss
Subjective risk
uncertainty based on a persons mental condition or state of m…
10 terms
Financial Risk Management
bid price
offer price
short sales
forward contract
price at which you're prepared to buy
price at which you're prepared to sell
selling an asset you do not own with the intention of buying…
an agreement to buy an asset in the future for a certain pric…
bid price
price at which you're prepared to buy
offer price
price at which you're prepared to sell
38 terms
Financial Risk Management
Expected Return
New Efficient Frontier
Total risk of a security (as measured…
Nonsystematic Risk:
is a weighted average of the possible returns, where the weig…
Tangent line from Rf to the efficient frontier of the risky i…
1. the portion that is determined by factors that affect all…
refers to the portion of the stock that is attributable to fa…
Expected Return
is a weighted average of the possible returns, where the weig…
New Efficient Frontier
Tangent line from Rf to the efficient frontier of the risky i…
Financial Risk Management
Hedging
Future Hedge
Forward Hedge
Money Market Hedge
Financial risk management technique in which an entity, that…
Either purchase or a sell a number of currency units for a ne…
Buy or sell volumes of currency at a point in time.... Larger A…
Foreign money markets to meet future cash flow needs and miti…
Hedging
Financial risk management technique in which an entity, that…
Future Hedge
Either purchase or a sell a number of currency units for a ne…
Financial and Risk Management Quiz
Which of the following best describes…
The first step in a risk management pr…
__________ is long-term borrowing from…
__________ is the use of common stock…
insurance covering losses resulting from medial and hospital…
identify the risks and potential losses.
Debt financing
Equity financing
Which of the following best describes…
insurance covering losses resulting from medial and hospital…
The first step in a risk management pr…
identify the risks and potential losses.
13 terms
Financial Engineering & Risk Management
Define 'Yield'
Define 'Equity'
Define 'Options'
Define 'Derivatives'
The annual income earned from an investment, expressed usuall…
Equity is the difference between the value of the assets/inte…
An option is a contract which gives the buyer the right to bu…
A derivative measures the sensitivity to change of an amount,…
Define 'Yield'
The annual income earned from an investment, expressed usuall…
Define 'Equity'
Equity is the difference between the value of the assets/inte…
43a: Financial Risk Management
10. A US company currently has domesti…
Natco has the following investment por…
Natco has the following investment por…
12. Questo borrowed $100,000 from a ba…
Correct Answer: A) Undertake the British investment.... Coeffic…
Correct Answer: B) 9.86%... Answer (b) is correct because the e…
Correct Answer: C) Investment C.... Answer (c) is correct becau…
Correct Answer: B) 8.24%... See formula for effective annual in…
10. A US company currently has domesti…
Correct Answer: A) Undertake the British investment.... Coeffic…
Natco has the following investment por…
Correct Answer: B) 9.86%... Answer (b) is correct because the e…
136 terms
Financial Risk Management Exam 1
expected return
A: the CV reflects the effects of both…
A: One that MINIMIZES risk & MAXIMIZES…
A: add additional securities to our po…
a weighted average of the possible returns, where the weight…
Q: Why's the coefficient of variation (CV) a better measure o…
Q: What's an "optimal" portfolio?
Q: How can we form an optimal portfolio?
expected return
a weighted average of the possible returns, where the weight…
A: the CV reflects the effects of both…
Q: Why's the coefficient of variation (CV) a better measure o…
11 terms
Financial Risk Management Test 1
1.4. What is the difference between sy…
1.5. Outline the arguments leading to…
1.7 "Arbitrage pricing theory is an ex…
2.5 What is meant by net interest inco…
Nonsystematic risk can be diversified; systematic risk can't.…
All investors make the same estimates of means, standard devi…
The CAPM assumes that there is only one factor driving return…
Net interest income of a bank is interest received minus inte…
1.4. What is the difference between sy…
Nonsystematic risk can be diversified; systematic risk can't.…
1.5. Outline the arguments leading to…
All investors make the same estimates of means, standard devi…
21 terms
Financial risk management
Expected return on a portfolio
Beta
Beta > 1
Systematic risk
Weighted average of investments... = (v1 return% × (v1 ÷ total p…
Correlation between investment price and portfolio price.... Hig…
Systematic risk is higher than market portfolio
Uncertainty inherent in the market. (i.e. market risk)
Expected return on a portfolio
Weighted average of investments... = (v1 return% × (v1 ÷ total p…
Beta
Correlation between investment price and portfolio price.... Hig…
85 terms
Chapter 16 - Financial Risk Management
Financial (Economic or Strategic Expos…
Interest Rate
Foreign Exchange (FX)
Economic
The risk that the overall value of an organization may change…
The financial risk related to changes in investment values or…
The financial risk that arises from the exposure an organizat…
A type of foreign exchange risk exposure that is the long-ter…
Financial (Economic or Strategic Expos…
The risk that the overall value of an organization may change…
Interest Rate
The financial risk related to changes in investment values or…
121 terms
Financial Risk Management
The amount received by an investor as…
What is the formula for Return on Inve…
A percentage of the amount invested
What is the formula for Rate of Return?
Return
Amount received - Amount invested
Rate of return
Return on investment... -------------------------... Amount invested
The amount received by an investor as…
Return
What is the formula for Return on Inve…
Amount received - Amount invested
20 terms
Financial risk managment
Incremental VAR(A)
DVAR_i
Purpose of stress testing and scenario…
Derivatives Policy Group (1995)Guideli…
Var(portfolio with asset A)-Var(portfolio without asset A), c…
The product of the marginal change in risk per unit change in…
To determine the size (but not the frequency) of potential lo…
Parallel yield curve shift of plus or minus 100bp... yield curve…
Incremental VAR(A)
Var(portfolio with asset A)-Var(portfolio without asset A), c…
DVAR_i
The product of the marginal change in risk per unit change in…
Risk management and financial info
Types of business risks
Types of financial risk
Types of operational risk
Risk management process
Strategy risk... Enterprise risk... Product risk... Economic risk... Prop…
Gearing risk... Credit risk... Liquidity risk... Market risk
Process risk... People risk... Systems risk (IT)... Event risk
Risk awareness and identification ... Risk assessment and measur…
Types of business risks
Strategy risk... Enterprise risk... Product risk... Economic risk... Prop…
Types of financial risk
Gearing risk... Credit risk... Liquidity risk... Market risk
Financial Management Risks
inflation risk
interest rate risk
income risk
personal risk
also called purchasing power risk, is the chance that the cas…
is the risk that arises for bond owners from fluctuating inte…
you may lose your job due to unexpected problems
doing something that can ruin something that will cost you mo…
inflation risk
also called purchasing power risk, is the chance that the cas…
interest rate risk
is the risk that arises for bond owners from fluctuating inte…
106 terms
Guillemette - Financial Planning: Risk Management
Risk
Objective Risk
Subjective Risk
Chance of Loss
uncertainty concerning the occurrence of a loss
relative variation of actual loss from expected loss... "Degree…
uncertainty based on a person's mental condition or state of…
the probability that an event will occur
Risk
uncertainty concerning the occurrence of a loss
Objective Risk
relative variation of actual loss from expected loss... "Degree…
15 terms
Chapter 16-Financial Risk Management
three major types of financial risk
three major types of FX risk
hedging... speculation... arbitrage
forward contract
interest rate risk... FX risk... commodity price risk
economic risk... transaction risk ... translation risk
hedging-purpose is to insure an asset's value or minimize the…
an agreement between two parties to buy and sell a fixed amou…
three major types of financial risk
interest rate risk... FX risk... commodity price risk
three major types of FX risk
economic risk... transaction risk ... translation risk
60 terms
B6 - Financial Risk Management
Risk
3 Types of Risk Preferences
Certainty Equivalent
Risk-Indifferent Behavior
Uncertainty;... Refers to the variability of returns associated…
1 - Risk-Indifferent Behavior... 2 - Risk-Averse Behavior... 3 - Ri…
The point at which an investor is indifferent to risk
Doing whatever provides the highest return;... An increase in th…
Risk
Uncertainty;... Refers to the variability of returns associated…
3 Types of Risk Preferences
1 - Risk-Indifferent Behavior... 2 - Risk-Averse Behavior... 3 - Ri…
BEC 6 - Financial Risk Management
Risk-Indifferent
Risk-Averse
Risk-Seeking
Diversification
increase in the level of risk doesn't result in an increase i…
increase in the level of risk results in an increase in manag…
increase in the level of risk results in a decrease in manage…
process of selecting investments of different or offsetting r…
Risk-Indifferent
increase in the level of risk doesn't result in an increase i…
Risk-Averse
increase in the level of risk results in an increase in manag…
BEC- Financial Risk Management - Risk and return
equity risk premium
risk averse
risk-neutral investors
risk-seeking investors
it is equal to mean/real return less the risk free retun
investors must be compensated to take risk
investors that prefer investment wit higher return no matter…
investors that prefer take higher risks and would invest in h…
equity risk premium
it is equal to mean/real return less the risk free retun
risk averse
investors must be compensated to take risk
43 terms
B6 - Financial Risk management
risk indifferent behavior
risk-averse behavior
risk-seeking behavior
Diversification
highest return period, don't care about risk
general rule... increase in the level of risk results in an incr…
increase in the level of risk results in a decrease in manage…
selecting investments of different (or offsetting) risks
risk indifferent behavior
highest return period, don't care about risk
risk-averse behavior
general rule... increase in the level of risk results in an incr…
Unit 5- Financial Risk Management
what is a return?
what is the return on investment formu…
what is the rate of return? formula?
what are all the names for systematic…
amount received by an investor as compensation for accepting…
amount received - amount invested
rate of return is a percentage of the amount invested... formula…
systematic risk... market risk... undiversifiable risk
what is a return?
amount received by an investor as compensation for accepting…
what is the return on investment formu…
amount received - amount invested
24 terms
B6: Financial Risk Management
Risk Preferences
diversification
DUNS
interest rate risk
1. Risk-Indifferent Behavior... -highest return period... -reflects…
1. diversifiable risk - unique to a specific business... 2. nond…
Diversifiable Risk - Unsystematic Risk(Nonmarket/Firm Specifi…
if interest rate goes up the value of the fixed rate bond goe…
Risk Preferences
1. Risk-Indifferent Behavior... -highest return period... -reflects…
diversification
1. diversifiable risk - unique to a specific business... 2. nond…
SU 5: Financial Risk Management
Return on Investment
Rate of Return
Systematic Risk also called Market Ris…
Unsystematic Risk
Amount received - Amount Invested
Return on Investment/ Amount Invested
The risk faced by all firms. Changes in the economy as whole,…
also called unique risk or company risk, is the risk inherent…
Return on Investment
Amount received - Amount Invested
Rate of Return
Return on Investment/ Amount Invested
96 terms
Financial Risk Management & Capital Budgeting
Avoidable Costs
Cash Flow Hedge
Committed Costs
Credit Risk
costs that will continue to be incurred if a particular cours…
a hedge of the variability in the cash flows of a recognized…
costs related to the company's basic commitment to open its d…
risk that a firm will default on payment of interest or princ…
Avoidable Costs
costs that will continue to be incurred if a particular cours…
Cash Flow Hedge
a hedge of the variability in the cash flows of a recognized…
41 terms
Financial Risk Management and Capital Budgeting
Avoidable Costs
Cash flow hedge
Committed costs
Credit (default) risk
Costs that will not continue to be incurred if a particular c…
A hedge of the variability in the cash flows of a recognized…
Costs related to the company's basic commitment to open its d…
The risk that a firm will default on payment of interest or p…
Avoidable Costs
Costs that will not continue to be incurred if a particular c…
Cash flow hedge
A hedge of the variability in the cash flows of a recognized…
35 terms
CTP - Chapter 16 Financial Risk Management
Financial Risk
Interest Rate Risk
FX Risk
FX Transaction Risk
AKA economic/strategic exposure... riisk that overall value may…
risk related to changes in investment values/borrowing costs…
3 types:... 1. economic => LT effect of changes in rates on PV o…
implicit risk => the value of future transactions will change…
Financial Risk
AKA economic/strategic exposure... riisk that overall value may…
Interest Rate Risk
risk related to changes in investment values/borrowing costs…
63 terms
Financial Literacy Module 4 Insurance for Risk Management
actual cash value
Affordable Care Act
Arkansas Motorist Liability Insurance…
avoidance
the amount equal to the replacement cost minus depreciation o…
put new consumer protections in place to give to give consume…
25/50/25; $25,000 for bodily injury or death of one... person in…
the risk management strategy that involves taking steps to el…
actual cash value
the amount equal to the replacement cost minus depreciation o…
Affordable Care Act
put new consumer protections in place to give to give consume…
68 terms
B6: Financial Risk Management
Risk-indifferent behavior
Risk-averse Behavior
Risk-seeking behavior
Diversification
Reflects and attitude toward risk in which an increase in the…
An attitude toward risk in which an increase in the level of…
an attitude toward risk in which an increase in the level of…
the process of selecting investments of different (or offsett…
Risk-indifferent behavior
Reflects and attitude toward risk in which an increase in the…
Risk-averse Behavior
An attitude toward risk in which an increase in the level of…
Financial Risk Management- B6
Risk Preferences
Risk- Indifferent
Risk- Averse
Risk- Seeking
varying attitudes toward risk
attitude toward risk in which an increase in level of risk do…
attitude toward risk in which an increase in the level of ris…
attitude toward risk in which an increase in the level of ris…
Risk Preferences
varying attitudes toward risk
Risk- Indifferent
attitude toward risk in which an increase in level of risk do…
16 terms
HKDSE BAFS - Financial Management - Risk Management
Risk
Risk management
Steps in implementing risk management
Pure risk
the uncertainty or possibility of suffering a loss or mishap
A form of management that helps a firm identify and assess it…
1. Identify risk... 2. Measure risk... 3. Control risk
Risks that only involve the possibility of loss or no loss
Risk
the uncertainty or possibility of suffering a loss or mishap
Risk management
A form of management that helps a firm identify and assess it…
28 terms
BEC 6: Financial Risk Management
Managers who demand more return on an…
Manager who is neutral with regard to…
Managers who seek reduced return for h…
Risks that cannot be eliminated throug…
Risk Averse
Risk Indifferent
Risk Seeking
Non-Diversifiable Risk (Systematic [market])
Managers who demand more return on an…
Risk Averse
Manager who is neutral with regard to…
Risk Indifferent
Finance Cluster - Financial Info. Management and Risk Management
Accural accounting
After-tax return
Blue chip stock
Collective Bargaining
A type of accounting that recognizes incomes when they are ea…
The return from an investment or business activity after taxe…
Stock of a company that has a history of being profitable and…
A process of negotiating contracts, wages, hours, with an emp…
Accural accounting
A type of accounting that recognizes incomes when they are ea…
After-tax return
The return from an investment or business activity after taxe…
Module 43: Financial Risk Management & Capital Budgeting
Equity risk premium
Standard deviation also represents
Return on investment
Normal distribution
8.7% real return on stocks minus risk-free real return as mea…
risk
measures return after the fact & therefore doesn't consider r…
bell shaped curve, with the mean being the expected return &…
Equity risk premium
8.7% real return on stocks minus risk-free real return as mea…
Standard deviation also represents
risk
64 terms
Ch 15 Financial decisions and risk management
Finance
Finance involves which four responsibi…
Responsibilities of the financial mana…
Cash-flow management
the business function involving decisions about a firm's long…
1. Determine a firm's long-term investments... 2. Obtain fund to…
1. Cash-flow management... 2. Financial control... 3. Financial pla…
1. Manage the pattern of cash flows (revenues) and outflows (…
Finance
the business function involving decisions about a firm's long…
Finance involves which four responsibi…
1. Determine a firm's long-term investments... 2. Obtain fund to…
23 terms
Financial Management 9 - Risk and Rates of Return
Investment Returns
Investmenk Risk
Risk Premium
Risk Aversion
Return = (Amount received - Amount invested)/Amount Invested
The probability of earning a low or negative actual (realized…
The difference in return between a risky asset and riskless a…
We assume that investors dislike risk and require higher rate…
Investment Returns
Return = (Amount received - Amount invested)/Amount Invested
Investmenk Risk
The probability of earning a low or negative actual (realized…
Chapter 6: Part 4 - Financial Risk Management
Diversification
Risk - Mnemonic
Interest Rate Risk (Yield Risk)
Market Risk
Selecting investments of different (or offsetting) risks.
D: Diversifiable Risk... U: Unsystematic Risk (Non-market/Firm S…
Exposure of the owner of the instrument to fluctuations in th…
Exposure of a security or firm to fluctuations in value as a…
Diversification
Selecting investments of different (or offsetting) risks.
Risk - Mnemonic
D: Diversifiable Risk... U: Unsystematic Risk (Non-market/Firm S…
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