Basis risk is considered a systematic, or market, risk. Systematic risk is the risk arising from the inherent uncertainty of the markets. Unsystematic, or non-systematic, risk, which is the risk associated with a specific investment. The risk of a general economic turndown, or depression, is ...
Futuresare a type of financial asset known as aderivativewhose value is linked to an underlying asset. The underlying asset can be a commodity or a financial instrument. Buyers and sellers of futures contracts use them to hedgeprice riskor to trade speculatively. The intention behind a basis qu...
What is a risk premium and who might take advantage of it? What are the sources of risk? Which can be eliminated and how? What is the risk on different financial assets and what is affecting their risk? What is the difference between market risk and idiosyncratic risk?
A basis point is one hundredth of a percentage point, or 0.01%. It is used to discuss small fluctuations in equity indexes, interest rates, and yields on fixed annuities. Many financial analysts work with basis points, and you may also hear them referred to in news broadcasts about financia...
Basis Risk Basis rate swaps help to mitigate (hedge)basis risk, which is a type of risk associated with imperfect hedging. This type of risk arises when an investor or institution has a position in a contract or security that has at least one stream of payablecash flowsand at least one ...
Speculative risk is usually associated with investment, which nearly always carries the possibility of making a profit or loss. The degree of risk can vary immensely. Spread betting, a form of gambling on market movements, can be very risky as the profits or losses can vastly outweigh money st...
Asbestosis is not a cancer like mesothelioma, but it’s still very dangerous. There’s no cure for asbestosis, and while treatments can help manage the condition, it’s considered a terminal illness. Key Facts on Asbestosis It is a type of pulmonary fibrosis (disease marked by scarring of...
A flight risk is a criminal defendant awaiting trial who is considered likely to leave the area to avoid going to trial. Most of...
Change is constant. Just because a risk control plan made sense last year doesn’t mean it will next year. In addition to the above points, a good risk management strategy involves not only developing plans based on potential risk scenarios but also evaluating those plans on a regular basis....
Understanding Systemic Risk The federal government uses systemic risk as a justification—an often correct one—to intervene in the economy. The basis for this intervention is the belief that the government can reduce or minimize the ripple effect from a company-level event through targeted regulation...