Essentials of Financial Risk Management
Chapter One
What Is Financial Risk
Management?
After reading this chapter you will be able to
Describe the financial risk management process
Identify key factors that affect interest rates, exchange rates,
and commodity prices
Appreciate the impact of history on financial markets
Although financial risk has increased significantly in recent years,
risk and risk management are not contemporary issues. The result
of increasingly global markets is that risk may originate with events
thousands of miles away that have nothing to do with the domestic
market. Information is available instantaneously, which means that
change, and subsequent market reactions, occur very quickly.
The economic climate and markets can be affected very quickly by
changes in exchange rates, interest rates, and commodity prices. Counterparties
can rapidly become problematic. As a result, it is important to
ensure financial risks are identified and managed appropriately. Preparation
is a key component of risk management.
What Is Risk?
Risk provides the basis for opportunity. The terms risk and exposure have
subtle differences in th ... read full excerpt from Essentials of Financial Risk Management ebook
