Financial Education

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:

Investment Risk Management Process

Identifying Nonfinancial Risk Exposures

A Completeness Fund for Equity Management

Enterprise Risk Management

Strategic Asset Allocation in Portfolio Management