Derivatives and Risk Management
Unit 1: RISK MANAGEMENT I ntroduction : Risk Risk can be defined as the chance of loss or an unfavourable outcome associated with an action. Uncertainty does not know what will happen in the future, the greater the uncertainty, the greater the risk. Definition of Risk Management : 1) Risk management is an integrated process of delineating (define) specific areas of risk, developing a comprehensive plan, integrating the plan, and conducting the ongoing evaluation’ – Dr. P.K. Gupta. 2) Risk Management is the process of measuring, or assessing risk and then developing strategies to manage the risk’ – Wikipedia. 3) Managing the risk can involve taking out insurance against a loss, hedging a loan against interest rate rises, and protecting an investment against a fall in interest rates’ – Oxford Business Dictiona ry Unit 2- Derivative instruments-Forward and Future Process of Risk Management The Five Essential Steps of a Risk Management Process are:...