Browse By

Risk. What is Risk?

What is risk? Risk is uncertainty. Risk is opportunity. Risk is often misunderstood. Traders like risk and uncertainty because uncertainty breeds opportunity and trades.

When it comes to financial risk management, we measure price movements (financial risk) and volatility (i.e. standard deviation). We use a simple measure to answer a simple question – “By how much can prices move over a given time period?”

Here is a simple rule for risk assessment. Don’t think in terms of absolutes and averages. Think in terms of levels, trends and scales.  The risk is not that you will get the average or the averaging period wrong. The risk is that you will misread the level/threshold of risk you are facing; that you will misread the change and miss the transition to the next higher level.

 

 

Recent Posts

  1. TARF PSR PFE Model in Excel – Part II
  2. TARF PSR PFE Exposure calculation model
  3. Stress testing correlation – The positive correlation stress test
  4. Hedge effectiveness of vanilla options, TARF and participating forwards. A case study.
  5. Anti-Money Laundering Programmes – Systems
  6. Anti-Money Laundering Programmes – Regulations
  7. Calculating IBNR – Process Checklist
  8. Portfolio Management and Optimization – Sample Exam
  9. Basel III US Implementation – Collateral recognition – Counterparty credit risk
  10. Index matching portfolio optimization with Solver

View More

Premium Courses: