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Derivatives and Risk Management by Ranganatham Ranganatham, Madhumathi Madhumathi

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18

Market Risk

Learning Objectives

After reading this chapter, you will be able to understand

  • the concept of value at risk
  • portfolio risk
  • market risk
  • approaches to measuring market risk
  • practices of stock exchanges in India
Chapter Outline

18.1 Introduction

18.2 Risk Management

18.3 Value-at-Risk Measure

18.4 Approaches to Quantification of Value-at-Risk

18.5 Sub-Elements of Value-at-Risk

18.6 Evaluation of Value-at-Risk

THE SITUATION

Indrani is the portfolio manager of an investment bank. In view of volatility in the securities market, she wants to protect the value of her portfolio of investments. Before embarking on protective measures, she would like to know the following: ‘What is the risk of her portfolio?’; ‘Is the risk greater ...

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