Topic 18 Flashcards
0
Q
Risk hedging
A
Like betting on both horses
Eg using options ie take put option if share falls- left with the strike price - premium charged for option. Mitigate loss
1
Q
Eg of risk sharing
A
Excess of ins pol
2
Q
Pooling risk
A
Diversification
3
Q
What type of risk cant be diverified against and why
A
Systemic
Risk inherant in the systeeg stock market- can pool inc but if whole market goes down…
4
Q
Netting
A
Use income of same currency to make payment in that curr so no exchange takes place
5
Q
Correlation- how measured?
A
Bet -1 and +1
If 0.5+ tend to rise and fall at the same time
-0.5- -1- opposing cycles
0 no correlation
6
Q
Which type of risk is fsa not resp for?
A
Performance risk
7
Q
Diversification- ideal no. Of shares?
A
30
