Risk management with derivatives
6 important questions on Risk management with derivatives
What is the difference between event risk and ongoing risk?
What are the forms of business risk?
2. Strategic risk (competitive, technological and other risks)
3. Operational risk (risks related to business processes, tax rules, human capital or trade credit)
What are the forms of financial risk?
2. Financing cost risk - insecure future interest rates
3. Refinancing risk - uncertainty whether a company can retake a loan with same terms of agreement
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How do you calculate the market value at risk?
What are the differences between a future and a forward?
2. The daily difference between the price of a future and the agreed upon price needs to be matched by the buyer of the future, this is not the case with a forward3. With a future, the seller may decide to deliver the underlying asset on a day of choice in the agreed delivery month, while with a forward it may only be on the decided upon date
What are the 2 types of hedging strategies?
2. Long hedge - buy a futures contract to cover a risk
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