Got a tricky question? Receive an answer from students like you! Try us!

Corporate Financial Risk Management - Essay Example

Only on StudentShare
Ph.D.
Author : gvandervort
Essay
Finance & Accounting
Pages 3 (753 words)

Summary

Corporate Financial Risk Management Date: Executive summary Financial derivates helps firms to mitigate risk, futures contracts are one such derivatives which help the firm hedge against potential losses as well as isolate opportunities for investment…

Extract of sample
Corporate Financial Risk Management

Therefore, it is recommendable for the firm to hedge against price volatility by buying futures contract. Table of contents Introduction……………………………………………………………………………… 4 Designing of the hedging strategy…………………………………………………………4 An assessment of the impact of the above hedging strategy………………………………5 Advantages and disadvantages of futures contract ……………………………………….6 Misuse of financial derivates………………………………………………………………7 Conclusion and recommendations………………………………………………………...8 References…………………………………………………………………………………9 Introduction Financial engineers have developed a number securities and derivates such as futures and contracts, these financial derivatives can be used in hedging and as risk mitigation strategies. In order to offer delineation of how financial derivates helps firm in militating against losses that may occur due to changes in market factors below is report on cooper works, outlining and delineating the process of is management through derivatives. ...
Download paper
Not exactly what you need?

Related Essays

Financial Innovation & Risk Management of Goldman Sachs
The paper tells that over the recent years, commercial banks in the banking industry have recorded dramatic losses because of risks it faces due to global crisis. This is because, in the financial perspective, risk is assessed as the tendency whereby the actual return does not match with the expected return. As a commercial bank, Goldman Sachs faces market risk, financial risk and operation risk that arise from either external or internal activities. With banks facing a crisis as a result, of risks that arise from credit exposure and interest rate position among other risks they have resolved…
13 pages (3263 words)
Financial Risk Management
At the business level, managers use VaR as a standard summery of market risk exposure. A benefit of the VaR which is a, the great value theory, is that it may be computed without full information of the return allocation. Semi or fully non-parametric estimation processes are obtainable for downside risk estimation. Additionally, at an adequately low confidence level the VaR calculate explicitly concentrates regulators and risk manager’s attention on uncommon losses, than on potential catastrophic great losses. The general use of VaR based risk management is that, it has become increasingly…
11 pages (2761 words)
Importance of Corporate Governance on Bank Risk Management
This paper concentrates on the application of these principles in banks and their importance in bank risk management. Corporate governance is important in banking institutions because it ensures that procedures are in adherence. Banks faces various risks which require proper planning on risk management in order to deal with them amicably (Gup 281). Corporate governance ensures equal treatment of shareholders by giving them a chance to participate in critical matters. This is possible in participation of meetings where important matters concerning a bank are in discussion. Here, the bank…
6 pages (1506 words)
derivatives as a way of mitigating financial risk
Certain creditor protection rules are extended to these derivatives and this helps to increase their security and reduce financial risks. The other side is that with excessive credit protection norms, capital markets will under price the credit risks. This means that risks that should be valued at say 100 Pounds will be considered to be worth only 80 Pounds. This increases systemic risks and helps to propagate credit booms. The reason is that the lending firm considers a risk of 80 Pounds worthwhile while extending loans whereas if the assets had a risk of 100 Pounds, the lending firm would…
8 pages (2008 words)
Financial Risk Management
Businesses in order to increase the return or to reduce the level of risk associated with product (financial product) are increasingly making use of financial derivates in the respective portfolios. Among the range of derivatives being used in market following few derivatives are most commonly used (Culp, 2011): Futures contracts ( facilitating transfer of asset on future date at an agreed price) Options (Call option or put option facilitates the purchasing or selling option to buyer or seller to an agreed date and price. To mention as the name implies options are not obligations). Swaps…
4 pages (1004 words)
corporate financial management
Also the investments were done assuming that the available market information on the housing markets are correct. The banks granted loans assuming that markets were efficient while overlooking the underlying risk. This led to increase in the number of defaulters that eventually resulted in the financial crisis and the global economic meltdown of 2007-2012. Evaluation of argument: financial crisis means redundancy of the efficient market theory as an explanation of financial decisions The financial crisis of 2007-2012 highlighted the redundancy of efficient market theory as an explanation of…
4 pages (1004 words)
Corporate Risk Management
Derivatives Derivatives refer to a method where one party owning a risk transfers the risk to another individual (Malz 189). The party receiving the risk bears the risk but at the same time has the advantage of making a profit is the risk does not materialise. The original owner of the risk does not have to pay anything to the risk buyer but has to forego any benefits derived from the non-occurrence of the risk. The advantage of this method of risk management to the business over using insurance is that the business is not obliged to pay any insurance premiums and therefore the only cost is…
9 pages (2259 words)