0
Want this question answered?
Be notified when an answer is posted
Add your answer:
Earn +20 pts
What is the definition of market risk reduction?
Market risk reduction is the aggregate effort of an investor towards diminishing the possibility of suffering a loss due to factors that affect the market as a whole. Examples of factors that pose market risks are natural calamities and political insecurity in a country.
How do you reduce market risk and company unique risk?
In terms of investing, (I just learnt this in my Finance class yesterday), market risk cannot be reduced because such risk are the result of Marco level issues (unemployment, GDP, inflation, generally items that are very difficult to modify). However, when investing you could reduce a unique risks, risk that are specifically related to a single firm/company, by diversifying your portfolio. That is, to invest in several different stocks/bond such that you have a good mix. Specifically, have a good mix of stocks that react differently to the market conditions to cancel out the risk of others such that when the market is struggling, a stock that excels in such conditions will make up for the loss of stocks that correlate positively with the market conditions.
What are the market potential indicators?
Market Potential Indicators are statistics that are designed to help managers make decisions regarding expansion in to an emerging market. Some examples are Market Size, Market Growth Rate, Economic Freedom, Country Risk, etc. They are intended to be used in combination with traditional evaluation procedures in order to make the best possible decision.
Why does market research reduce the risk of a new product launch?
Performing market research does not guarantee success, but just because someone thinks a new product is a great idea does not mean everyone will think so. Market research will show if there is a need for such a product and how likely prospective customers would accept it and purchase it.
Why do you carry out research?
Research can help you define your target market, assist in estimating market demand for your product, help in defining the qualities the market values in your product, finding the best medium to communicate with those potential customers, and reduce the risk of inopportune market investments. Ton's of people create new products or launch business ventures every year with no foreknowledge of the market demand, only to find they have over estimated the probabilities of success.
Is it correct that Sensitivity is the an absolute measure of risk?
Sensitivity is the an absolute measure of risk
What is sensitivity index n capital market?
The market sensitivity index of individual security ( or portfolio security) mesures the systematic risk of a security. The sensitivity index is denoted by Beta It forms part of the CAPM(Capital asset pricing model). and is calculated as follows: Beta=COVsm/VAR^2 M Where S stands for security, and m for the Market portfolio.
The market risk premium is measured by?
The market risk premium is measured by the market return less risk-free rate. You can calculate the market risk premium as market risk premium is equal to the expected return of the market minus the risk-free rate.
What are some of the different market risks?
There are many different market risks. Some different market risks are systematic risk, credit risk, country risk, political risk, market risk, interest rate risk and many more.
What is another term for market risk?
another term for market risk is non-diversifiable risk.
What is the difference between systematic risk and unsystematic risk?
It is the risk in financial market or in market general which exists due to factors which are beyond the control of humans or the people working in market and that;s why risk free rate use in market is only exists there to protect the investors from that systemetic risk. This is the risk other than systematic risk and which is due to factors directly controllable by the people dealing in market and market risk premium rate is paid due to compensate this type of unsystematic risk in market. Total Risk = Systematic Risk + Unsystematic Risk
What information does beta give to a financial manager?
Beta is also referred to as financial elasticity or correlated relative volatility, and can be referred to as a measure of the asset's sensitivity of the asset's returns to market returns, its non-diversifiable risk, its systematic risk or market risk. On an individual asset level, measuring beta can give clues to volatility and liquidity in the marketplace. On a portfolio level, measuring beta is thought to separate a manager's skill from his or her willingness to take risk.
What is a market risk when entering into a derivative contract?
Market Risk. This is the potential financial loss due to adverse changes in the fair value of a derivative. Market risk encompasses legal risk, control risk, and accounting risk.
How interpret the market risk of a security?
a security's risk is divided into systematic (Market risk) and Unsystematic risk (Diversifiable risk), the market risk is the risk inherent to the security, it is attributed to macro economic factors such as inflation, war etc. and affects all securities in the market and so cannot be diversified away. Market risk of a security is measured and reflected by the Beta coefficientwhich is an index that measures the security's volatility to market movements i.e. how much the returns of the security will vary if their changes in the market
What is country risk analysis?
Hi there, there are many types of risk - market risk, credit risk, liquidity risk, operational risk, concentration risk... Country Risk is when the major factor affecting something is the territory or geography (as opposed to market conditions (market risk) or any of the other factors mentioned above).
What type of risk is the risk that a bond will decrease in value when interest rates in the economy rise inflation or deflation or by interest rate or financial?
Increases in Expected Future Interest Rates (forward rates) as well as adverse changes in those influences that might cause future interest rates to be higher than expected, such as higher inflationary expectations will typically cause secondary market prices for bonds to go lower.This is a kind of Market Risk (risk to the Market Price of an investment) and can has a sensitivity that is typically measured using Modified Duration. Definitions of these terms can be found at www.davidandgoliathworld.com
Distinguish between systematic and unsystematic risks?
It is the risk which is due to the factors which are beyond the control of the people working in the market and that's why risk free rate of return in used to just compensate this type of risk in market. This is the risk other than systematic risk and which is due to the factors which are controllable by the people working in market and market risk premium is used to compensate this type of risk. Total Risk = Systematic risk + Unsystematic Risk
