Tag: Risk Management

A Primer on Financial Derivatives

A Primer on Financial Derivatives

Financial derivatives are often used for commodities, like corn, oil, gasoline, or gold, and for currencies, often the U.S. Dollar abd the Euro. However, there are derivatives based on stocks, bonds, interest rates, and indices. Companies use derivatives to lower their operational risk for the delivery of raw materials, the changes in exchange rates or in interest rates. Trading requires a small down payment (margin) and usually consists of rolling positions (contracts are liquidated by another derivative before coming to term).

Value at Risk in Portfolio Management

Value at Risk in Portfolio Management

Value at Risk measures the likelihood of losses to an asset or portfolio, over a defined period for a given confidence interval, due to market risk. Such a narrow definition of risk is further limited to the VaR focus on downside risk and potential losses in the short-term; indeed, VaR can be computed over a quarter or a year, but it is usually computed over a day, a week or a few weeks.

Time-varying betas in Risk Management

Time-varying betas in Risk Management

Estimation of betas with regression is adequate for asset managers, but it is not appropriate in risk management of portfolios because monitoring is done on a frequent basis – daily and even intra-daily. Indeed, parameters estimated by OLS at these frequencies will not reflect the actual market conditions because they just represent an average value over time on the sample.

Property, Credit crunch and Investment – Part II

Property, Credit crunch and Investment – Part II

This short analysis is prepared to assist a private sector house builder facing the credit crunch. In the next posts we provide strategies and insights in evaluating the development scheme and improving its performances… The development scheme, realized with a traditional procurement route, consists of 10 storey residential building with retail space at the ground…

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Property, Credit crunch and Investment – Part I

Property, Credit crunch and Investment – Part I

This short analysis is prepared to assist a private sector house builder facing the credit crunch. In the next posts we provide strategies and insights in evaluating the development scheme and improving its performances…

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