Risk types, CAPM, risk governance, financial disasters and ethics.
40 cards · basic cards · AI-written, checked twice. Edit anything.
- What is market risk?
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The risk of loss from adverse movements in market prices (interest rates, equity prices, foreign exchange, commodities).- What is credit risk?
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The risk that a borrower or counterparty fails to meet financial obligations on time.- What is operational risk?
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The risk of loss from failed internal processes, people, systems, or external events.- What is liquidity risk?
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The risk of being unable to meet financial obligations when due without significant cost.- What is reputational risk?
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The risk of loss from damage to a firm's reputation affecting earnings or capital.- What does CAPM stand for?
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Capital Asset Pricing Model.- What is the CAPM formula?
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Expected return = Risk-free rate + Beta x (Market risk premium).- What does beta measure in CAPM?
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The systematic risk of a security relative to the overall market.- What is the risk-free rate in CAPM?
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The return on a zero-risk investment, typically represented by government bonds.- What is the market risk premium in CAPM?
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The difference between the expected return on the market and the risk-free rate.- What is the Security Market Line (SML)?
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The line showing the relationship between systematic risk (beta) and expected return on a security.- Define systematic risk.
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Risk that affects all securities in the market and cannot be eliminated through diversification.- Define unsystematic risk.
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Risk specific to individual securities that can be reduced or eliminated through diversification.- What is Value at Risk (VaR)?
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The maximum loss expected over a given time period at a specified confidence level.- What is Expected Shortfall (ES)?
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The average loss when Value at Risk is exceeded, also called Conditional Value at Risk.
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