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Search results for 'risk'

March 12, 2018

Adverse Selection Risk

The risk of trading with a more informed trader. Advertisements

February 18, 2018

Reasons Value At Risk is difficult to use for portfolios containing options:

Option returns are not normally distributed. Neither covered calls nor protective puts have normal returns. Therefore without the assumption of normal returns it is difficult to estimate VaR. It is also difficult to calculate covariance between two options or an option and the underlying.

February 17, 2018

Credit risk in a forward contract is assumed by:

The party to which the market value is positive.

February 17, 2018

Risk-Adjusted Return on Capital (RAROC)

The expected return on an investment divided by a measure of capital at risk.

February 17, 2018

Performance netting risk occurs online in…

…multistrategy, multimanager environments and only manifests itself when individual portfolio managers within a jointly managed product generate actual losses over the course of a free-generating cycle (usually a year). Basically some managers lose capital others make money and charge performance fees which combined with the losses results in further decreased performance for the product.

February 17, 2018

ESG risk

The risk to a company’s market valuation resulting from environmental, social, and governance factors.

February 12, 2018

The two characteristics of the return distributions associated with alternative investments that reduce downside risk are:

Positive skewness and low kurtosis

February 12, 2018

Decision Risk

Is the risk of changing strategies at the point of maximum loss. Decision risk is increased by strategies that have: Frequent small positive returns but when a large return occurs more likely it is negative Extreme returns relative to mean return

February 12, 2018

J factor risk

Refers to the judge’s track record in adducting bankruptcies and restructurings.

February 5, 2018

Manager’s total active risk (formula)

Manager’s total active return = √[(Manager’s “true” active risk)^2 + (Manager’s “misfit” active risk)^2] Can also calculate IR as (Manager’s “true” active return)/(Manager’s “true” active risk)