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What is a credit risk when entering into a derivative contract?
Credit Risk. Credit risk or default risk evolves from the possibility that one of the parties to a derivative contract will not satisfy its financial obligations under the derivative contract.
Are derivative transactions designed to increase risk and are used almost exclusively by speculators who are looking to capture high returns?
Derivatives are often used in hedge funds. The losses on the holdings could possibly be offset by the profits from the derivative. They can also be used to make high returns quickly.
Are there diminishing returns to risk taking?
No. Fundemantaly returns increase with risk, they do not diminish.
Will a bond's yield to maturity increase or decrease if a bond is downgraded by rating agencies?
it will increase due to increase in risk. The bigger the risk the bigger the return and of course more chances of losing big as well.
An increase in the debt ratio will generally have no effect on what?
business risk
What is a credit risk when entering into a derivative contract?
Credit Risk. Credit risk or default risk evolves from the possibility that one of the parties to a derivative contract will not satisfy its financial obligations under the derivative contract.
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.
What is a basic risk when entering into a derivative contract?
Basis Risk. This is the spot (cash) price of the underlying asset being hedged, less the price of the derivative contract used to hedge the asset.
Are derivative transactions designed to increase risk and are used almost exclusively by speculators who are looking to capture high returns?
Derivatives are often used in hedge funds. The losses on the holdings could possibly be offset by the profits from the derivative. They can also be used to make high returns quickly.
What has the author Manuel Ammann written?
Manuel Ammann has written: 'Credit risk valuation' -- subject(s): Credit, Credit ratings, Management, Risk management 'Pricing derivative credit risk' -- subject(s): Derivative securities, Prices, Mathematical models, Credit, Risk
What happens to the damping when the settling time increases in a derivative error compensation?
increase
What has the author Rajiv Srivastava written?
Rajiv Srivastava has written: 'DERIVATIVES AND RISK MANAGEMENT' -- subject(s): Risk management, Derivative securities
What is derivative exposure?
Derivative exposure refers to the risk associated with financial derivatives, which are instruments whose value is derived from an underlying asset, index, or benchmark. This exposure arises from fluctuations in the prices of the underlying assets, potentially leading to gains or losses for the holder of the derivative. It can be used for hedging purposes to mitigate risk or for speculation to profit from price movements. Managing derivative exposure is crucial for investors and institutions to maintain financial stability.
What has the author JEAN-PHILIPPE BOUCHAUD written?
JEAN-PHILIPPE BOUCHAUD has written: 'THEORY OF FINANCIAL RISK AND DERIVATIVE PRICING: FROM STATISTICAL PHYSICS TO RISK MANAGEMENT'
Does a narcotic increase your risk of HIV?
The use of narcotics can increase your risk of HIV if their abuse affects your judgment about sexual safety. The safe, prescribed use of narcotics doesn't increase the risk of HIV.
What does a credit derivative refer to?
A credit derivative is a financial instrument which separates and transfers some of the credit risk of a loan. Some examples of credit derivatives are credit linked notes or credit default swaps.
Will you get cancer if you work with benzine?
That exposure will increase the risk, but a risk is not a certainty.
