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¶ … theories risk management, types risk, implications portfolio theory.
As the risk factors have diversified and as new types of risks have appeared, the theories of risk management have also multiplied, with new theories to address new areas of concerns and new threats. For example, when it comes to financial risk (including a large number of related risks, such as operational risk or currency risks), the company comes under the threat of fluctuations from the financial market, whether the currency market, the interest rate market, the commodity market etc.
With this in mind, theories like Value at Risk aim to measure the maximum loss that a portfolio can undertake during a certain period of time, with a certain probability. Subsequently, such risk management approaches are then used in capital requirements, such as Basel II. Probability theories...
Market risk is a type of risk that exposes the company to threats from the market, as prices fluctuate during a certain period of time. Market risk is part of a wider category of risks, known as financial risks.
These include credit risk, interest rate risk, equity risk or currency risk. Each of these show the exposure of the company to a particular type of threat (currency, interest rate) and depend on the degree to which the company is involved in operations that have such risks. For example, if the company is operating only nationally, it is…
Since portfolio theory has two different objectives, namely to maximize profits and minimize risks, it is understandable that both theories of risk management and the correct identification of the types of risks that can affect a business are essential in reaching both objectives. In the latter case, the correct identification of risk factors to which the organization is exposed will lead to the correct risk management tools being used. At the same time, this also means that the organization has to have clearly identified the risk management theories that can help it deal with its exposure to the different factors of risk. The two elements are thus interconnected and essential in portfolio theory.
Chew, Donald, H. "Corporate Risk Management," (Columbia University Press, 2008)
Khatta, R.S. "Risk Management," (Global India Publications, 01.01.2008)
Risk Management Financial derivatives are an innovation in the field of finance that enable us to understand, measure and manage our financial risks. The definition of financial derivative according to the textbooks is of a financial instrument, and the value of any financial derivative is based on the value or values of the underlying securities or groups of securities that constitute the derivative. It can be said that there have been
Portfolio Management In the project portfolio management context, a portfolio is an aggregation of active programs, projects and other business activities that indicate an organization's priorities, investments and allocation of resource (The standard for portfolio management, 2008). According to the editors of PM Network, "Portfolio management is the centralized management of one or more of those portfolios to achieve specific strategic business objectives" (2008, p. 75). Using project portfolio management
Credit Risk Management Banks are an important part of the economy of any nation. Traditionally, the banks operate as financial intermediaries serving to satisfy the demand of people in need of various forms of financing. Through this, banks enable people to purchase home and businesses to expand. These financial institutions therefore facilitate investment and spending that are responsible for fueling the growth of the economy. In spite of their vital role
Capital Requirement and Risk Behavior Arab African International Bank Midan ElSaray El Koubra, Garden City Caoro The research will mainly dwell on the capital requirements and risk behavior of banks, more in particular the credit risk. The purpose of this research is to identify and analyze the relationship between capital requirements and the risk behavior of banks in Egypt more in particular the Arab African International Bank, which is the case study for this
These types of investments are often illiquid, so the investor needs to view them as long-term investments. However, the lack of liquidity also means that for the most part they have low levels of correlation with the broad market. Derivatives are another possibility, and their potential impact on the portfolio will be discussed in the next question. They can either increase risk or decrease risk, depending on the type of
Pharmaceutical industries have to operate in an environment that is highly competitive and subject to a wide variety of internal and external constraints. In recent times, there has been an increasing trend to reduce the cost of operation while competing with other companies that manufacture products that treat similar afflictions and ailments. The complexities in drug research and development and regulations have created an industry that is subject to intense