Topic 17

Question 0

Speculative (two way) risk

Answer 0

Outcome can be either better or worse than expected
Not normally able to ins against
Eg exch rates
Business outcomes

Question 1

Pure risk (downside risk)

Answer 1

Either nothing happens or something bad happens

Ie involves only loses

Question 2

Systemic risk is

Answer 2

Risk that the failure of one participant will lead to domino affect andother failures

Question 3

Non systemic risk is

Answer 3

Risk of aparticular share or sector failing to deliver

Question 4

Credit risk is

Answer 4

Risk that debtor fails to pay on time
One way risk
Also known as default risk

Question 5

Market risk

Answer 5

Factos that affect the performance of a market

Exch rate, int rates, price of shares , bonds

Question 6

Concentration risk

Answer 6

Danger of putting all eggs in one basket
Ie senior coll on 1 flight
Sinle HO

Question 7

Couterparty risk

Answer 7

Failure to carry out their part of the agreement or contract

Sometimes known as default risk

Question 8

Settlement risk

Answer 8

One party delivers goods but the other doesnt

Question 9

Operation risk

Answer 9

Emp mis conduct
Breakdown of systems, software etc
Now cap adequacy req under basel accord 2