Identifying Financial Risk Exposures
Financial risk exposures include market risk, credit risk and liquidity risk.
Market risk relates to interest rates, exchange rates, stock prices and commodity prices. How will changes in these factor affect the portfolio, particularly in the context of asset/liability management?
Credit risk is the loss caused when a debtor or the counterparty in an agreement fails to make a payment. It can be managed using credit derivatives, or simply by using traditional credit analysis techniques in order to screen counterparties.
Liquidity risk is an inability to efficiently buy or sell an asset. It is important to realize that a security’s liquidity can change during the investor’s time horizon. Changes in asset liquidity, particularly when liquidity declines, have an important impact on the overall ability of a portfolio to meet client objectives.
For more information, see all articles on: Governance, Portfolio Management, Risk Management See also:
The Intelligent Investor: The Classic Text on Value Investing
Financial Statement Analysis: A Practitioner's Guide, 3rd Edition
Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)
