HOME TheInfoList.com
Providing Lists of Related Topics to Help You Find Great Stuff
[::MainTopicLength::#1500] [::ListTopicLength::#1000] [::ListLength::#15] [::ListAdRepeat::#3]

Basis Risk
BASIS RISK in finance is the risk associated with imperfect hedging . It arises because of the difference between the price of the asset to be hedged and the price of the asset serving as the hedge, or because of a mismatch between the expiration date of the hedge asset and the actual selling date of the asset (calendar basis risk), or—as in energy—due to the difference in the location of the asset to be hedged and the asset serving as the hedge (locational basis risk). CONTENTS * 1 Definition * 2 Examples * 3 References * 3.1 Notes * 3.2 See also * 3.3 External links DEFINITIONUnder these conditions, the spot price of the asset, and the futures price, do not converge on the expiration date of the future. The amount by which the two quantities differ measures the value of the basis risk. That is, Basis = Futures price of contract - Spot price of hedged asset
[...More...]

"Basis Risk" on:
Wikipedia
Google
Yahoo

picture info

Consumer Credit Risk
The following article is based on UK market, other countries may differ. Categories of FINANCIAL RISK CREDIT RISK * Concentration risk MARKET RISK * Interest rate risk
Interest rate risk
* Currency risk * Equity risk * Commodity risk LIQUIDITY RISK * Refinancing risk OPERATIONAL RISK * Country risk
Country risk
* Legal risk
Legal risk
* Model risk * Political risk
Political risk
* Valuation risk REPUTATIONAL RISK VOLATILITY RISK SETTLEMENT RISK PROFIT RISK SYSTEMIC RISK * v * t * e CONSUMER CREDIT RISK (also RETAIL CREDIT RISK) is the risk of loss due to a customer's non re-payment (default) on a consumer credit product, such as a mortgage, unsecured personal loan, credit card, overdraft etc
[...More...]

"Consumer Credit Risk" on:
Wikipedia
Google
Yahoo

picture info

Uncertainty
Related concepts and fundamentals: * Agnosticism
Agnosticism
* Epistemology
Epistemology
* Presupposition * Probability
Probability
* v * t * e Situations often arise wherein a decision must be made when the results of each possible choice are uncertain. UNCERTAINTY has been called "an unintelligible expression without a straightforward description". It describes a situation involving ambiguous and/or unknown information . It applies to predictions of future events, to physical measurements that are already made, or to the unknown. Uncertainty
Uncertainty
arises in partially observable and/or stochastic environments, as well as due to ignorance , indolence , or both
[...More...]

"Uncertainty" on:
Wikipedia
Google
Yahoo

picture info

Interest Rate Risk
INTEREST RATE RISK is the risk that arises for bond owners from fluctuating interest rates . How much interest rate risk a bond has depends on how sensitive its price is to interest rate changes in the market. The sensitivity depends on two things, the bond's time to maturity, and the coupon rate of the bond. CALCULATING INTEREST RATE RISK Interest rate
Interest rate
risk analysis is almost always based on simulating movements in one or more yield curves using the Heath-Jarrow-Morton framework to ensure that the yield curve movements are both consistent with current market yield curves and such that no riskless arbitrage is possible. The Heath-Jarrow-Morton framework was developed in the early 1991 by David Heath of Cornell University, Andrew Morton of Lehman Brothers, and Robert A. Jarrow of Kamakura Corporation and Cornell University
[...More...]

"Interest Rate Risk" on:
Wikipedia
Google
Yahoo

picture info

Finance
FINANCE is a field that deals with the study of investments . It includes the dynamics of assets and liabilities over time under conditions of different degrees of uncertainty and risk. Finance
Finance
can also be defined as the science of money management . Market participants aim to price assets based on their risk level, fundamental value, and their expected rate of return . Finance
Finance
can be broken into three sub-categories: public finance , corporate finance and personal finance
[...More...]

"Finance" on:
Wikipedia
Google
Yahoo

Expected Return
The EXPECTED RETURN (or EXPECTED GAIN) on a financial investment is the expected value of its return (of the profit on the investment). It is a measure of the center of the distribution of the random variable that is the return. It is calculated by using the following formula: E = i = 1 n R i P i {displaystyle E=sum _{i=1}^{n}R_{i}P_{i}} where R i {displaystyle R_{i}} is the return in scenario i {displaystyle i} ; P i {displaystyle P_{i}} is the probability for the return R i {displaystyle R_{i}} in scenario i {displaystyle i} ; and n {displaystyle n} is the number of scenarios. Although this is what one expects the return to be, it only refers to the long-term average. In the short term, any of the various scenarios could occur
[...More...]

"Expected Return" on:
Wikipedia
Google
Yahoo

picture info

Risk
RISK is the potential of gaining or losing something of value. Values (such as physical health , social status , emotional well-being, or financial wealth) can be gained or lost when taking risk resulting from a given action or inaction, foreseen or unforeseen. Risk
Risk
can also be defined as the intentional interaction with uncertainty . Uncertainty is a potential, unpredictable, and uncontrollable outcome; risk is a consequence of action taken in spite of uncertainty. Risk perception is the subjective judgment people make about the severity and probability of a risk, and may vary person to person. Any human endeavor carries some risk, but some are much riskier than others
[...More...]

"Risk" on:
Wikipedia
Google
Yahoo

picture info

Hazard
A HAZARD is any agent that can cause harm or damage to life , health , property or the environment . Hazards can be dormant or potential, with only a theoretical probability of harm. An event that is caused by interaction with a hazard is called an incident . The likely severity of the undesirable consequences of an incident associated with a hazard, combined with the probability of this occurring, constitute the associated risk . If there is no possibility of a hazard contributing towards an incident, there is no risk. Identification of hazards is the first step in performing a risk assessment
[...More...]

"Hazard" on:
Wikipedia
Google
Yahoo

Spot Price
In finance , a SPOT CONTRACT, SPOT TRANSACTION, or simply SPOT, is a contract of buying or selling a commodity , security or currency for immediate settlement (payment and delivery) on the spot date , which is normally two business days after the trade date . The settlement price (or rate) is called SPOT PRICE (or SPOT RATE). A spot contract is in contrast with a forward contract or futures contract where contract terms are agreed now but delivery and payment will occur at a future date. CONTENTS * 1 Spot prices and future price expectations * 2 Spot date * 3 Examples * 3.1 Bond * 3.2 Currency
Currency
* 3.3 Commodity
Commodity
* 4 See also SPOT PRICES AND FUTURE PRICE EXPECTATIONSDepending on the item being traded, spot prices can indicate market expectations of future price movements in different ways. For a security or NON-PERISHABLE commodity (e.g
[...More...]

"Spot Price" on:
Wikipedia
Google
Yahoo

Non-deliverable Forward
In finance , a NON-DELIVERABLE FORWARD (NDF) is an outright forward or futures contract in which counterparties settle the difference between the contracted NDF price or rate and the prevailing spot price or rate on an agreed notional amount . It is used in various markets such as foreign exchange and commodities. NDFs are prevalent in some countries where forward FX trading has been banned by the government (usually as a means to prevent exchange rate volatility ). CONTENTS* 1 Market * 1.1 List of currencies with NDF market * 2 Structure and features * 3 Pricing and valuation * 4 Uses * 4.1 Synthetic foreign currency loans * 4.2 Arbitrage opportunity * 4.3 Speculation * 5 References * 6 Other sources MARKETThe NDF market is an over-the-counter market. NDFs began to trade actively in the 1990s. NDF markets developed for emerging markets with capital controls, where the currencies could not be delivered offshore
[...More...]

"Non-deliverable Forward" on:
Wikipedia
Google
Yahoo

Financial Risk Modeling
FINANCIAL RISK MODELING refers to the use of formal econometric techniques to determine the aggregate risk in a financial portfolio . Risk modeling is one of many subtasks within the broader area of financial modeling . Risk modeling uses a variety of techniques including market risk , value at risk (VaR), historical simulation (HS), or extreme value theory (EVT) in order to analyze a portfolio and make forecasts of the likely losses that would be incurred for a variety of risks. Such risks are typically grouped into credit risk , liquidity risk , market risk , and operational risk categories. Many large financial intermediary firms use risk modeling to help portfolio managers assess the amount of capital reserves to maintain, and to help guide their purchases and sales of various classes of financial assets
[...More...]

"Financial Risk Modeling" on:
Wikipedia
Google
Yahoo

Profit Risk
PROFIT RISK is a risk management tool that focuses on understanding concentrations within the income statement and assessing the risk associated with those concentrations from a net income perspective
[...More...]

"Profit Risk" on:
Wikipedia
Google
Yahoo

picture info

Systemic Risk
In finance , SYSTEMIC RISK is the risk of collapse of an entire financial system or entire market, as opposed to risk associated with any one individual entity, group or component of a system, that can be contained therein without harming the entire system. It can be defined as "financial system instability, potentially catastrophic, caused or exacerbated by idiosyncratic events or conditions in financial intermediaries". It refers to the risks imposed by interlinkages and interdependencies in a system or market, where the failure of a single entity or cluster of entities can cause a cascading failure , which could potentially bankrupt or bring down the entire system or market. It is also sometimes erroneously referred to as "systematic risk "
[...More...]

"Systemic Risk" on:
Wikipedia
Google
Yahoo

Settlement Risk
SETTLEMENT RISK is the risk that a counterparty (or intermediary agent) fails to deliver a security or its value in cash as per agreement when the security was traded after the other counterparty or counterparties have already delivered security or cash value as per the trade agreement. The term covers factors incidental to the settlement process which may suspend or prevent a trade from completing, even though the parties themselves are in agreement, are acting in good faith , and otherwise competent to perform. The term applies only to risks inherent to the settlement method of a particular transaction. Broader risks of trading such as political risk or systemic risk may interrupt markets and prevent settlement, but these are not settlement risk per se. One form of settlement risk is foreign exchange settlement risk or cross-currency settlement risk, sometimes called HERSTATT RISK after the German bank that made a famous example of the risk
[...More...]

"Settlement Risk" on:
Wikipedia
Google
Yahoo

picture info

Political Risk
POLITICAL RISK is a type of risk faced by investors , corporations , and governments that political decisions, events, or conditions will significantly affect the profitability of a business actor or the expected value of a given economic action. Political risk
Political risk
can be understood and managed with reasoned foresight and investment. The term political risk has had many different meanings over time. Broadly speaking, however, political risk refers to the complications businesses and governments may face as a result of what are commonly referred to as political decisions—or "any political change that alters the expected outcome and value of a given economic action by changing the probability of achieving business objectives"
[...More...]

"Political Risk" on:
Wikipedia
Google
Yahoo

Legal Risk
Basel II classified LEGAL RISK as a subset of Operational Risk in 2003. There is no standard definition, but there are at least two primary/secondary definition sets in circulation. MCORMICK, R. 2004 Legal risk is the risk of loss to an institution which is primarily caused by: (a) a defective transaction; or (b) a claim (including a defense to a claim or a counterclaim) being made or some other event occurring which results in a liability for the institution or other loss (for example, as a result of the termination of a contract) or; (c) failing to take appropriate measures to protect assets (for example, intellectual property) owned by the institution; or (d) change in law. MCORMICK, R
[...More...]

"Legal Risk" on:
Wikipedia
Google
Yahoo
.