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way off topic, financial risk management
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Author:  nik_nunez [ Fri Mar 25, 2011 9:44 am ]
Post subject:  way off topic, financial risk management
does anyone work in financial risk management? I choose this as one of my modules for my MBA (my god do i wish i did not) and the coursework is due around risks for my company, the problem is I dont deal with financial risk in my day job so its going to be a tricky assisgment. It will be based around how a company minimise risk in my case around foreign exchange and interest rate markets (work for the post office and will link it to our foreign exchange and savings products as both are affected by changes in exchange / interest rates) and how the company uses hedging, fowards, futures, options etc to minise risk.

I have a headache just writing this let alone getting my head around the whole module, if anyone works in this subject (firstly i feel for you :shock:) but I would be grateful for a few tips and advise.

thanks in advance
Author:  Tim S [ Sat Mar 26, 2011 2:16 pm ]
Post subject:  Re: way off topic, financial risk management
What specific information are you after?

In general companies can manage risk in a number of ways. Companies can hedge against interest rates rising with a number of derivative products such as caps and collars. Swaps are a very common hedging tool where companies with floating rate loans can, for a premium, pay a fixed rate instead of the floating rate, which again protects against rising interest rates and also provides the added advantage of the company knowing exactly that payment they have each month; assists with budgeting.

There are also futures, which means means locking in a certain price for something up to a a certain time in the future. As an example, this provides a hedge against certain commidity risk.

As you can see there are a lot of options and products available to manage risk. Interest rate risk is the most common as everyone with any type of loan worries about rising rates; FOREX risk on the other hand is is a little more involved.

This is just top-of-my-head stuff and pretty general. Feel free to ask something more specific and I'll see what I can do. Good luck!
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