High Risk Deliveries and the Need for Neonatal Resuscitation Teams
The need risk
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Transcript of The need risk
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Risk ManagementThe NeedAlaleh Mani2013
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Definition and source of Risk
Risk= Unexpected variable of price or earning.
Business Risk: Management decision making risk.Business Strategy riskMacroeconomic risk
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Extreme Market MovementEvents caused volatility which resulted in financial losses and raised the need for the Risk Management: 1971 Exchange rate broke1973 Oil shock1987 Black Monday1989 Japanese bubble1997 Asian contagion 1998 Russian default2001 September 112007 Credit crisis
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Globalization / DeregulationThese two factors increased the importance of risk management:
Deregulation in banks caused interest rate sensitivity.Globalization caused more exposure to currency exchange.
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Some related definition Derivatives: a zero sum game Leverage: allow Derivatives to be a useful
hedging instrument due to:1. Limited initial cash outlay2. low transaction cost. Value at risk: Maximum of loss over time with at
level of confidence. VAR is an statistical measure:1. Historical VAR2. Delta-normal VAR3. Monte Carlo VAR
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VAR VAR is ex-ante measure
VAR is difficult to calculate
VAR is comparable across different business.
VAR is for risk budgeting
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Other Risk management tools Stop- loss limit:After loss occurred Co. eliminates the position to
limit the loss. Ex-post ,Aggregated, easy to calculate. Notional limits:limit the notional amount Exposure limits: limit the risk factor though it is hard to calculate
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Exposures:Factors fail to measure to qualify the volatility of factors and the correlation between them
1.Duration for interest rate :effect interest rate changes on bond price
2.Beta for Equity Market
3.Delta for Option
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Valuation The process of discounting future expected
value of an asset to determine the current price
E(value)= mean of distribution of possible valueVAR explain the future distribution.
Derivatives valuation : risk neutral pricing to prevent the persistence of arbitrage situations.
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Types of Major Risk Market Risk
Liquidity Risk
Credit Risk
Operational Risk
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Market Risk Price volatility in financial Market:
Absolute Risk: directly on return volatility
Relative Risk: tracking error the risk to a benchmark
Basic Risk: if hedging instrument doesn’t correlate with underlying asset
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Liquidity Risk
Asset Liquidity Risk= Market Liquidity risk= trading liquidity risk
when large transaction influence the price
Fundinig liquidity risk=cash flow risk when a financial institute is unable to raise cash
to roll over its debt or ..
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credit Risk Credit risk: counterparty obligation default
Sovereign risk: country willingness to pay it obligation
Settlement risk counterparty default in paying obligation
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Operational Risk Model risk: loss due to misapplied model
People Risk: internal employee or external fraud
Legal risk: lawsuit, penalties, fines cause value loss
No reputational or strategic risk included