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Risk Management
Outline ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Hedging Volatility ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Interest Rate Volatility ,[object Object],[object Object],[object Object],[object Object],[object Object]
Exchange Rate Volatility ,[object Object],[object Object],[object Object],[object Object]
Commodity Price Volatility ,[object Object],[object Object],[object Object],[object Object]
The Risk Management Process ,[object Object],[object Object],[object Object],[object Object],[object Object]
Risk Profiles ,[object Object],[object Object],[object Object],[object Object]
Reducing Risk Exposure ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Forward Contracts ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Forward contract payoff
Hedging with Forwards ,[object Object],[object Object],[object Object],[object Object],[object Object]
Futures Contracts ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Hedging with Futures ,[object Object],[object Object],[object Object],[object Object],[object Object]
Swaps ,[object Object],[object Object],[object Object],[object Object],[object Object]
Example: Interest Rate Swap ,[object Object],[object Object],[object Object],[object Object],[object Object],+.5% LIBOR + 9.5% LIBOR + 9% Swap Dealer Net -9% -LIBOR Net LIBOR + .5% 8.5% Swap Dealer w/A LIBOR + .5% 9% Company B 9% LIBOR + .5% Swap Dealer w/B 8.5% LIBOR + .5% Company A Receive Pay
Interest rate Swap
Option Contracts ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Payoff Profiles: Calls
Payoff Profiles: Puts
Hedging Commodity Price Risk with Options ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Hedging Exchange Rate Risk with Options ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Hedging Interest Rate Risk with Options ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Quick Quiz ,[object Object],[object Object],[object Object],[object Object]

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Topic 8 Managing Risk