lecture 5 Flashcards
1
Q
what is market risk
A
the potential negative deviation from the expected value of a financial instrument due to changes in the level or volatility of market prices
2
Q
different types of market risk
A
interest rate risk equity risk real estate risk inflation risk FX risk Volatility risk spread risk
3
Q
why measure market risk?
A
for management information setting limits resource allocation performance evaluation regulation
4
Q
value at risk?
A
it is the highest loss that is only surpassed in X% of all cades given a time horizon
5
Q
how to compute value at risk ?
A
VAR = position x extreme change
how much u can lose depend on how much your position is
