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Mastering Derivatives Markets, 4th Edition by Francesca Taylor

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3

Risk – a Primer

‘Risk of what? Making money, losing money or both?’

Introduction

Financial risks: market, credit, liquidity

Operational risk

More esoteric risks

INTRODUCTION

Throughout this book mention is made of risk and risk management. But risk means different things to different people. Some individuals and firms love risk but to others, it is a necessary evil of doing business. The market professionals are well aware of risk and reward, but there are many different types of risk that may trap the unwary.

I will make a very general assumption that large firms and corporates typically want to hedge or mitigate their risk, whilst banks mostly want to take on risk for potential profit. This chapter is divided into generic financial ...

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