Kapitel 6

Question 1

What is Market risk ?

Answer 1

Market risk, or price risk, results from unforeseen market price fluctuations that impact a company’s assets and liabilities.

Question 2

market risk based on the nature of the company‘s business activities.

Answer 2

The relevance of market risk varies based on a company’s business activities and asset-liability structure. Examples include:

*Equity risk is significant for banks and depends on non-banks’ equity holdings.

*Interest rate risk affects all companies, impacting bond values, variable interest income/expenses, and present values of future liabilities.

*Foreign exchange risk is important for both banks and non-banks, determined by international linkages.

*Fluctuations in market prices of raw materials, intermediate products, and end products/services result in procurement or sales risk.

Question 3

Equity risk

Answer 3

Equity risk results from stock price fluctuations impacting a company’s equity-based investments.

Question 4

Portfolio theory

Answer 4

Portfolio theory, also known as portfolio selection theory, focuses on how investors determine their optimal portfolio.
*Investors care about 2 Parameters: expected return and volatility
*Investors are Risk-averse (Low Risk)
*Returns are normally distributed
*No transactions Costs